US manufacturing grows for 13th straight month
http://finance.yahoo.com/news/US-man...&asset=&ccode=
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US manufacturing grows for 13th straight month
http://finance.yahoo.com/news/US-man...&asset=&ccode=
^^^ That's fine and dandy but we lost 54,000 more jobs last month.
^^^ in point of fact, US Industrial Activity is a statistic that is increasingly 'spun' to sound good on the surface, whereas a good inspection 'under the hood' reveals a different situation altogether. For example US 'manufacturing activity' does not differentiate between an end product which contains 100% US made components and sub-assemblies. and an end product that consists mostly of imported components and sub-assemblies with final assembly in America. This is the underlying reason why US 'manufacturing activity' can appear to be up, while at the same time US manufacturers handed some of their workers pink slips.
from
(snip)"Eleven of the 18 manufacturing industries are reporting growth in August, in the following order: Primary Metals; Apparel, Leather & Allied Products; Transportation Equipment; Fabricated Metal Products; Electrical Equipment, Appliances & Components; Miscellaneous Manufacturing; Computer & Electronic Products; Paper Products; Chemical Products; Food, Beverage & Tobacco Products; and Printing & Related Support Activities. The five industries reporting contraction in August are: Furniture & Related Products; Petroleum & Coal Products; Nonmetallic Mineral Products; Plastics & Rubber Products; and Machinery.
WHAT RESPONDENTS ARE SAYING ...
•"Still experiencing intermittent delays in electronic components due to capacity and raw materials." (Electrical Equipment, Appliances & Components)
•"International sales are especially strong. Domestic business is solid." (Chemical Products)
•"Orders and business still strong." (Primary Metals)
•"Order rate has slowed some. Supplier capacity in general seems to be improved." (Machinery)
•"Large customers reducing pull rates for production." (Computer & Electronic Products)"(snip)
at the same time ...
(snip)"Note: Sales in August 2009 were boosted by "Cash-for-clunkers".
From MarketWatch: GM August U.S. sales down 24.9% to 185,176 units
General Motors Co. said Wednesday that U.S. sales in August slumped 24.9% to 185,176 vehicles from 246,479 in August 2009.
Note: in August 2009 U.S. light vehicle sales were 14.1 million (SAAR). This was related to "Cash-for-clunkers" - also General Motors emerged from bankruptcy on July 10, 2009.
I'll add reports from the other major auto companies as updates to this post.
Update1: From MarketWatch: Ford U.S. August sales slide 10.7% to 157,503
From MarketWatch: Chrysler U.S. August sales rise 7% to 99,611 units"(snip)
from
The point to be gleaned when one attempts to combine the data in the ISM Manufacturing report with the data in the Auto Sales report is that if manufacturers decide to purchase more raw materials and manufacture more products, this is enough to raise the ISM number in and of itself. Questions as to whether those additional products are actually being sold versus placed in inventory, as to whether those additional products are being sold at a price that results in a net profit for the manufacturer, even as to whether the customers buying those additional products are actually PAYING for them versus being extended terms via 'vendor' financing ( i.e. additional debt exposure for the manufacturer unless and until the customer actually pays for the products received ), or whether the same number of manufactured goods are being sold at higher US dollar prices or the same number of raw materials are being purchased at higher prices, don't factor into the ISM number at all.
for example ...
(snip)"NEW YORK — Chip-maker Intel Corp. is cutting its sales forecast for the quarter, adding fresh evidence that a rickety economy is putting a damper on the back-to-school shopping season.
Intel is the world's biggest provider of microprocessors for PCs and a bellwether for the broader technology industry.
In a statement Friday, the company said it is seeing "weaker than expected demand for consumer PCs in mature markets," including the U.S. and Europe.
The warning comes a little more than a month after Intel reported its biggest quarterly profit in a decade. But those results were fueled by a rebound in technology spending at corporations, many of which held off replacing older computers during the recession."(snip)
from
^^^ the obvious point exemplified by Intel is that supposed 'trends' can turn around on a dime.
Nevertheless, the ISM report was 'good' news !
In fact, some 'professional' commentary on this very point is now being posted ...
"(snip)"Wednesday, September 1, 2010
ISM Manufacturing Report Deceptively Not Very Strong
Although it came in higher than expected, the August Purchasing Managers Index report was not as strong as the headlines would have you believe. The components of the index which had the greatest positive effect on the overall index level (and their indicated trend) were: Prices +4% (increasing faster), Imports 4% (growing faster), and Customer Inventories +4.5% (low but slowing). Here is the source of this information:
As I suspected, pricing pressure is building in the system, inventory build is slowing down and imports are increasing, which is not really value-added in terms of putting U.S. workers to work or creating much-needed growth in our domestic capital base.
Once again the Truth is to be found somewhere other than where the media spotlight is shining... "(snip)
from
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Yes it does. The components and sub-assemblies for one manufacturer is the end product of another manufacturer. If an American manufacturer switches from a domestic suppler for components to a foreign suppler, the output of the domestic supplier declines. For example, if GM were to switch to a Chinese steel company instead of US Steel, then manufacturing output would decline as result of US Steel losing business to a Chinese company.
You may want to read this:
BG-IndustrialStats.pdf
This way you can argue more credibly. The weakness in your argument is in the time functions used to calculate the index.
(Anything doing ∑ with periods as this degrades the influence of local region to "another economic territory." In particular see paragraph 109 and 111 for the problem with your argument.)
GM's manufacturing output does NOT drop as a result of substituting foreign made components and sub-assemblies in place of US made ones. GM's manufacturing output does NOT drop if it substitutes, for example, foreign built engine blocks in place of former US block casting + former US piston machining + former US engine block sub-assembly. Per your cite, indeed this would result in a loss of business activity for the US supplier from whom GM formerly purchased raw metal block castings. But the loss of GM's former 'internal' manufacturing and assembly work necessary to wind up with a US engine block, which are 'substituted' by the foreign manufacturing and assembly work which are 'imported' along with importing a foreign made engine block, are NOT accounted for !Quote:
For example, if GM were to switch to a Chinese steel company instead of US Steel, then manufacturing output would decline as result of US Steel losing business to a Chinese company
As I mentioned earlier, since US manufacturing statistics almost never track sub-assemblies, this has allowed a huge 'loophole' to develop when attempting to equate, for example, the measured number of completed new US cars with a certain amount of US economic activity being generated by the manufacture of that new US car. This also explains how some US corporations have increased profit margins via increasing the 'productivity' of ( fewer ) US workers. In point of fact, the faulty statistics are allowing the foreign labor content inherent in imported sub-assemblies to be 'tacked onto' the actual productivity of the US assembly workers.
Or put another way, you didn't really think that UAW workers would be willing to perform 50% more actual work for the same pay, did you ? The fact is that by importing more and more sophisticated foreign sub-assemblies, more and more 'upstream' US labor requirement can be permanently eliminated. Following with your cited example, how much actual US economic content can be found in a new GMC pickup that comes across the Mexican border as a 98% complete new vehicle ?
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My understanding from listening to the analysts on CNBC, Fox Biz and CNN is that the latest ISM numbers were NOT all that encouraging. The lion's share of the purchases represented little more than inventory replacement. In other words, they restocked their shelves without necessarily increasing their overall sales. Consumer demand is still weak and getting WEAKER.
^^^ you left out the fact that 4% of the supposed ISM improvement was due to prices paid by US manufactures to purchase raw materials having increased significantly over the past 2 months. This compares to 4.5% of the supposed ISM improvement being due to inventory build. Again, the ISM number has absolutely nothing to do with questions regarding US manufacturer profit margins declining on rising input costs versus stagnant sale prices, with US manufacturers actually selling the products they are building versus adding to unsold inventory, or with US manufacturers actually getting paid for products they do 'sell' via vendor financed extended terms.