Economic Check

As my regular readers know, I know dirt about the economy. There is no way for me to rationally discuss it other than in vague feelings of unease or calm. Right now, the feeling is unease. And Maxed Out Mama, whom I defer to on all matters money, has some opinions about all the recent data in manufacturing:

If you look at the full advance report (pdf), while shipments are rising inventories are generally high. Fabricated metals orders were down 4.1% after December's 1.2% increase. Shipments of fabricated metals rose 1.0% after two months of declines. Machinery shipments and new orders were down 1.7% and 1.5% respectively, but that came after strong increases in December. Overall, durable shipments are up sharply YoY. It does seem as if there is some life in manufacturing somewhere. Last year YoY shipments mostly declined and that made me very nervous. It could also be that price increases account for the rise, and that volume is largely down.

On a YoY basis, motor vehicles and parts shipments declined 5.7%, and orders declined 7.6%. However unfilled orders are down 13.2% and inventories are down 6.2%, so we are getting closer to increased volume.

This also bodes ill:

Maybe the reason that the three top presidential candidates seem to be economic illiterates is that only economic illiterates would run at a time like this. It's hard to figure that we won't be electing a one-term president in November with numbers like these.

Chicago PMI came in at 44.5, well into recessionary territory. Not the beginning of a recession, but part way in. Employment is at 33.5, which also is a reading that should be associated with a later stage of recession.

From the commentary on the release:

Like a siren warning of the approach of a tornado, the 7 point drop in the February Business Barometer sent a warning of the destructive winds of a shrinking US Economy. As the Barometer dove into retreat, the Prices Paid index continued to roar its warning of destructive inflation. The specter of recflation, recession and inflation, provides consumers, business professionals, policymakers, and politicians with a host of challenges and no simple answers.

Yep. We now get to pay for all the playing with debt.

A couple things occur to me. First, we are truly a country that is governed by and for the people. The government, far from being the bastion of restraint and right-mindedness reflects the average American's fiscal approach--spend, spend, spend and then shock when the bills come due. Second, I believe the average American's perspective has changed from self-reliance to desire for security. A capitalistic society is not a secure society--as in there are no guarantees such as promised in a socialistic system. The up side of living insecurely is freedom and the ability to far exceed the minimum that comes with security. It seems to me that people feel that exceeding the minimum doesn't hold much appeal anymore.

The next President will preside during some gut-busting difficulty. A Democrat's instinct will be to go all FDR on the country which will be the sugar every one desires but will cause more long-term pain. Eventually, we Americans will have to take our medicine. I'm still disheartened that Bush's Social Security plan got deep-sixed back in the day. This next President can try to ignore reality, but reality won't ignore him.

And for the average consumer, reality most certainly has NOT ignored him.