From this morning's
Financial Times.
Each statistic tells a story, and collectively they are unlikely to have happy endings for the US economy.
- Yesterday's April Insitute for Supply Management index fell sharply from 55.2 to 53.3. The index has fallen 8 of the past 9 months. A steep fall in new orders (53.7 from 57.1) points to weaker production in coming months.
- Retail sales stagnated in March, rising just 0.1 percent (excluding the auto sector).
- Business investment slowed radically to just 4.7 percent in the first quarter (from a rate of 10.6 percent in 2004 and 14.5 percent in Q4 2004).
- Non-defense durable goods orders (excluding aircraft) fell 4.7 percent in March on top of a 2.5 percent decline in February.
- Massive $80.2 billion added to inventories in the first quarter ($33 billion more than Q4 2004) implies a further sharp slowdown in orders for Q3 2005.
- Q1 2005 wages grew by just 2.4 percent - the slowest rate on record.
- Federal Reserve expected to make another 1/4 point increase in rates today, with inflation pressures providing little room for accommodating the slowing economy.
The basic problem appears to be that consumers have the willingness to spend more but increasingly lack the ability, while businesses have the money to step up spending but seem to lack the willingness.
The Bush administration and the stockbrokers would like you to believe that the US is just hitting a "soft patch" which presents an opportunity to cull a little fat and buy some good stocks cheaply before the economy rebounds and strengthens. The aggregate weight of declining indicators, however, points to a sharper and more damaging decline in US economic prospects.
Manufacturers have fewer orders, retailers are sitting on huge inventories, businesses are battening down the financial hatches, and the Fed just keeps hiking the rates every time they meet.
Meanwhile consumer incomes are stagnating below inflation, high gas prices are hitting the wallet, and credit cards and remortgages are pretty well maxed out as the credit/housing bubbles hit their apex.
Stirling Newberry has laid out the implications of recession in his series of recent diaries and given excellent advice on preparing for the downside.
Bonddad has given stark warning what the huge consumer and government debt implies.
Jerome a Paris keeps us posted on the latest analysis of economic trends, with cogent warnings.
The data supports their cautions to our community and country. Pay down debt. Think hard before you pump more money into stocks, bonds or housing. Cash is king.