“Earlier today we reported that producer prices in May rose primarily as a result of a jump in electricity and nat gas prices. Which is why it is somewhat surprising that Industrial Production among Utilities dropped by the most, or -1.8%, for the second month in a row, following last month’s -3.2% decline. This drop was offset by an increase in Mining IP of 0.7% (a decline from April’s 1.1%) and the general manufacturing production which increased by a tiny 0.1%, still the best result of the past three months. Altogether, these amounted to an unchanged print in the broader index, which printed at 98.7, same as April, and the lowest since February, not to mention below expectations of a 0.2% increase. “
Via Zero Hedge
“A lot of things that have not happened since the last recession are starting to happen again. As you read the list below, you will notice that the year “2009″ comes up again and again. There is a reason for that. Many of the same patterns that we witnessed during the last major economic downturn are starting to repeat themselves. In fact, many of the things that are happening right now have not happened in quite a few years. For example, manufacturing activity in the U.S. has contracted for the first time in four years. The inventory to sales ratio is the highest that it has been in four years. Average hourly compensation just experienced the largest decline that we have seen in four years. We also just witnessed the largest decline in the number of mortgage applications that we have seen in four years. After everything that Barack Obama, the U.S. Congress and the Federal Reserve have tried to do, there has been no real economic recovery and now the U.S. economy is suddenly behaving as if it is 2009 all over again. A whole host of recent surveys indicate that the American people are starting to feel a bit better about the economy, but the underlying economic numbers tell an entirely different story. The following are 12 clear signals that the U.S. economy is about to really slow down…”
“Are you ready for a future where China will employ millions of American workers and dominate thousands of small communities all over the United States? Such a future would be unimaginable to many Americans, but the truth is that it is already starting to happen. Chinese acquisition of U.S. businesses set a new all-time record last year, and it is on pace to absolutely shatter that record this year. Meanwhile, China is voraciously gobbling up real estate and is establishing economic beachheads all over America. If China continues to build economic power inside the United States, it will eventually become the dominant economic force in thousands of small communities all over the nation. Just think about what the Smithfield Foods acquisition alone will mean. Smithfield Foods is the largest pork producer and processor in the world. It has facilities in 26 U.S. states and it employs tens of thousands of Americans. It directly owns 460 farms and has contracts with approximately 2,100 others. But now a Chinese company has bought it for $4.7 billion, and that means that the Chinese will now be the most important employer in dozens of rural communities all over America. If you don’t think that this is important, you haven’t been paying much attention to what has been going on in the world. Thanks in part to our massively bloated trade deficit with China, the Chinese have trillions of dollars to spend. They are only just starting to exercise their economic muscles.”
“In the latest economic indicator that casts Wisconsin in a negative light, the Badger State ranks 49th in the nation in the most recent index from the Federal Reserve Bank of Philadelphia.
“Wisconsin clearly is not leading the recovery,” said William Delwiche, an economist in Milwaukee at Robert W. Baird & Co.
The Philadelphia Fed data is from its monthly state-by-state index of leading economic growth indicators, and is meant to predict how the state’s economy will grow in the next six months.
The 50-state Leading Index report for April showed only five states with contraction, assigning Wisconsin an index rank of -0.74%. Wyoming, with a rank of -1.29%, is the only state with a lower index.
Economists cautioned against reading too much into a single month’s data.
And the Philadelphia Fed’s report is imperfect. Among the multiple variables used to compile the leading index, a significant component is the monthly state employment report, which is prone to heavy revisions. That’s because the government bases its monthly findings on a survey of only about 3% of the state’s employers. That creates a wide margin of error when they are extrapolated statewide.”
Hourly Compensation Crashes Most Ever, Labor Costs Drops By Most In 4 Years, Manufacturing Compensation Plummets By 7%
“So much for the thesis of declining labor slack and rising labor leverage. Moments ago the BLS reported its Q1 labor costs which poured cold water over all recent hypotheses that the US worker’s plight is improving. It isn’t: productivity increased by 0.5% in Q1 in ling with expectations of 0.6% (on what is not exactly clear – everyone on their iPhones?) but it was labor costs which plunged -4.3% on expectations of a +0.5% increase driven by a 3.8% collapse in hourly compensation that was the stunner. This was the biggest labor cost drop in four years and the biggest collapse in hourly compensation in well, ever and confirms our observations from the last NFP report that quantity gains in jobs continue to be offset by quality declines in actual worker pay. As a reminder we were scratching our heads following the soaring Q4 labor cost and declining productivity data which made no sense in the general context of deteriorating labor conditions. Following this print, it all falls back into place and confirms the Q4 data was nothing but an outlier. Also,this may be the end of the core thesis behind David Rosenberg’s recently developed reflationary argument. “
Via Zero Hedge
“By now it is futile to point out the woeful inability of the ADP report to predict the NFP’s ARIMA X 12 output of pure noise so we’ll leave it at that. Here is the headline: May private payrolls created 135K with consensus looking for 165K – only two analysts were looking for a weaker number. This was the second lowest print since September excluding only the April 113K print. What’s worse is that the prior number which usually is revised to match the NFP was revised lower from 119K to 113K, confirming that the quality of NFP reporting in the past month is suspect to quite suspect. Don’t expect the imminent arrival of a manufacturing renaissance: mfg jobs were down 6,000. But fear not – Mark Zandi blames it on the sequester: “Manufacturers are reducing payrolls. The softer job market this spring is largely due to significant fiscal drag from tax increases and government spending cuts.” At least it wasn’t the May weather or tornadoes…”
“What in the world is China up to? Why are the Chinese hoarding so much gold? Does China plan to back the yuan with gold and turn it into a global reserve currency? Could it be possible that China actually intends for the yuan to eventually replace the U.S. dollar as the primary reserve currency of the planet? Most people in the western world assume that China just wants a “seat at the table” and is content to let the United States run the show. But that isn’t the case at all. The truth is that China doesn’t just want to compete with the United States. Rather, China actually plans to replace the United States as the dominant economic power on the planet. In fact, China already accounts for more global trade than the United States does. So what would happen one day if China announced that it was backing the yuan with gold and that it would no longer be using the U.S. dollar in international trade? It would cause a financial shift so cataclysmic that it is hard to even imagine. Most of those that write about the “death of the U.S. dollar” usually fail to point out that China is holding a lot of the cards as far as the fate of the dollar is concerned. China owns about a trillion dollars of our debt, China is the second largest economy on the planet, and nobody uses the dollar in international trade more than China does except for the United States. Up until now, China has had to use the U.S. dollar in international trade because there has not been an attractive alternative. But a gold-backed yuan would change all of that very rapidly.”
“Did you know that Barack Obama has been secretly negotiating the most important trade agreement since the formation of the World Trade Organization? Did you know that this agreement will impose very strict Internet copyright rules, ban all “Buy American” laws, give Wall Street banks much more freedom to trade risky derivatives and force even more domestic manufacturing offshore? If you have not heard about this treaty, don’t feel bad. Obama has refused to even give Congress a copy of the draft agreement and he has banned members of Congress from attending the negotiations. The plan is to keep this treaty secret until the very last minute and then to railroad it through Congress and have it signed into law by October. The treaty is known as “the Trans-Pacific Partnership”, and the nations that are reported to be involved in the development of this treaty include the United States, Canada, Japan, South Korea, Australia, New Zealand, Chile, Peru, Brunei, Singapore, Vietnam and Malaysia. Opponents of this treaty refer to it as “the NAFTA of the Pacific”, and if it is enacted it will push the deindustrialization of America into overdrive.”
“So much for the Chicago PMI 8 Sigma renaissance. Moments ago the Manufacturing ISM came out and confirmed that all those “other” diffusion indices were correct, except for the “data” out of Chicago (yes, shocking). Printing at a contractionary 49.0, this was a drop from 50.7, well below expectations of 51.0 (and far below the cartoonish Joe Lavorgna’s revised 53.0 forecast). More importantly, this was the worst ISM headline print since June 2009, the first sub-50 print since November 2012, while the New Orders of 48.8, was the worst since July 2012. Both Production and Backlogs tumbled by -4.9 and -5.0 to 48.6, and 48.0 respectively. In brief, of the 11 series tracked by the ISM, only 3 posted a reading over 50 in May. This compares to just 2 out of 11 that were below 50 in April. Oh well, so much for this recovery. But the good news for the market is that today is really bad news is really good news day, and stocks have soared as according to the vacuum tubes, the result means no taper. The farce must go on.”
Via Zero Hedge
“This is no time to be complacent. Massive economic problems are erupting all over the globe, but most people seem to believe that everything is going to be just fine. In fact, a whole bunch of recent polls and surveys show that the American people are starting to feel much better about how the U.S. economy is performing. Unfortunately, the false prosperity that we are currently enjoying is not going to last much longer. Just look at what is happening in Europe. The eurozone is now in the midst of the longest recession that it has ever experienced. Just look at what is happening over in Asia. Economic growth in India is the lowest that it has been in a decade and the Japanese financial system is beginning to spin wildly out of control. One of the only places on the entire planet where serious economic problems have not already erupted is in the United States, and that is only because we have “kicked the can down the road” by recklessly printing money and by borrowing money at an unprecedented rate. Unfortunately, the “sugar high” produced by those foolish measures is starting to wear off. We are going to experience a massive amount of economic pain along with the rest of the world – it is just a matter of time.”