Something is wrong in US industry…

March 9-15, 2024

Big news. A sharp drop in US industrial orders in February:

It is important to say that in other related indicators there is a decline, for example, basic orders for durable goods fell by 0.3%, with a growth forecast of 0.2% and a January indicator of -0.1%. At the same time, with continued deflation in the sector of all industrial goods, the trend towards inflation is increasing:

Taking into account the fact that there is not even a hint of declining inflation:

This situation looks extremely alarming. The process of deindustrialization is clearly gaining speed against the backdrop of a clear upward trend in prices for final products.

In fact, this means that an increasing proportion of components are imported into the United States. And this categorically requires the US political leadership to make a fundamental decision to support the real sector. Which will inevitably cause a sharp increase in inflation…

Macroeconomics. A completely gloomy picture is emerging in Western Europe.

3-month average UK GDP has declined for 5 months in a row (monthly dynamics):

Annual GDP dynamics in minus or zero for 4 months in a row:

The number of unemployed in Britain is the highest in 2 years, and without taking into account Covid – since the fall of 2012:

Industrial production in the eurozone -3.2% per month, for capital goods -14.2%:

And -6.7% per year: near the 15-year bottom set in September 2023 (-6.9%):

Almost 8% per year is the scale of the crisis of 1930-32.

Output in the Dutch manufacturing industry is -4.7% per month, excluding Covid, this is close to the lows of 2008:

The picture in annual dynamics is equally sad (-5.5%):

Orders for machinery and equipment in Japan -8.0% per year, 14th minus in a row:

US small business sentiment is only 0.4% from an 11-year low:

However, taking into account the first section of the Review, this is not surprising.

The New York Fed index again went into deep negative territory amid a collapse in new orders:

Construction permits in Australia at the bottom for 11 years for housing and for 12 for other types of houses:

China’s new home prices -1.4% per year, annual low and near 9-year bottom:

And the annual growth rate of loans in yuan (+10.1%) is minimal for all 26 years of data collection:

However, the Central Bank of China withdraws maximum liquidity from the financial system (through annual loans) in 1.5 years:

We have repeatedly explained that the US and Chinese economies are two sides of the same coin. So the problems of the United States have a symmetrical reflection in China.

Argentina CPI (Consumer Inflation Index) +276.2% per year, 33-year high:

Nigeria CPI +31.7% p.a., 28-year high:

Main conclusions. In both the USA and China – and these are the main engines of the world economy – the situation has become clear: if nothing is changed, the ongoing decline in industry will accelerate. If industry is supported (through easing monetary policy), then inflation will rise. If the policy on it is tightened in order to finally finish off inflation, which clearly has a tendency to grow, then the industry will collapse even faster.

Resolving this issue is not within the powers of the monetary authorities; this is a political problem. The trouble is that such fundamental decisions can be made only in one case – if there are strategic plans, and within the framework of which one can go to a clear deterioration of the situation in one of the fundamental directions of socio-political policy. And the trend towards deterioration is clearly increasing.

As an example, here is a graph of the increase in serious crimes related to shoplifting in the United States:

And the connection between the interest rate and the financial condition of households, or more precisely, their willingness to buy investment goods (invest in government debt).

And the mentioned strategic plans need to be explained to the population, otherwise serious destabilization is inevitable. But, as the situation shows, the Western elite has no strategic plans. And neither at the level of consensus, nor even at the level of individual elite groups. And this means that a radical deterioration of the situation is almost inevitable. Moreover, judging by the indicators, the moment of collapse (most likely associated with the collapse of financial markets) is quite close.

Well, we wish our readers a pleasant weekend and a safe end to the upcoming work week.