Tailwind fills the sails of the crisis

February 24 – March 1, 2024

Big news. Durable goods orders in the US fell -6.1% m/m. Apart from Covid, this is the bottom since 2017:

Pic. 1

This indicator is quite volatile and has made sharp downward moves several times over the past 25 years. But in our case, it is important because it shows the specifics of final demand in the United States. As can be seen from the analysis that we did in previous reviews, things are bad with production at the beginning of technological chains in the USA (stable deflation has been taking place for a year now):

Pic. 2

But final demand, especially in the pre-election year, is fundamentally important. And therefore, the decline in orders for durable goods suggests that there are problems in this area as well.

Macroeconomics. Sweden’s GDP -0.1% per quarter, 3rd negative in a row:

Sweden GDP Growth Rate
Pic. 3

And -0.2% per year, also the 3rd minus in a row:

Sweden GDP Annual Growth Rate
Pic. 4

Industrial production in Japan is -7.5% per month, over all 70 years of statistics it was worse only three times: in 2020 (Covid), 2011 (Fukushima) and 2009:

Japan Industrial Production MoM
Pic. 5

Industrial sales in Italy -0.1% per year, 8th negative in a row:

Italy Industrial Sales YoY
Pic. 6

PMI (expert index of industry health; its value below 50 means stagnation and decline) Chicago weakest in 7 months (44.0):

United States Chicago PMI
Pic. 7

Industrial activity in the Texas Fed zone has been in the red for 22 months in a row:

United States Dallas Fed Manufacturing Index
Pic. 8

And the service sector indicator for the same region is the worst in 10 months:

United States Richmond Fed Services Index
Pic. 9

Eurozone industry is most pessimistic in 11 years (not counting Covid):

Euro Area Industrial Sentiment
Pic. 10

According to the official version, China’s industrial PMI is worsening and continues to decline (49.1):

China NBS Manufacturing PMI
Pic. 11

But independent research is less gloomy (50.9):

China Caixin Manufacturing PMI
Pic. 12

Japan’s industry PMI of 47.2, minus the Covid dip, is an 11-year low:

Japan Manufacturing PMI
Pic. 13

The number of new buildings in Japan is -7.5% per year, the 8th minus in a row:

Japan Housing Starts YoY
Pic. 14

PPI (industrial inflation index for final goods in technological chains) of France -5.1% per year; over 30 years of data collection, the numbers were weaker only in 2009:

France Producer Prices Change
Pic. 15

Eurozone inflation expectations at 11-month peak:

Euro Area Consumer Confidence Price Trends Over Next 12 Months
Pic. 16

Loans to households in the eurozone +0.3% per annum, 9-year minimum:

Euro Area Household Credit Growth
Pic. 17

U.S. home mortgage applications (not refinancing) are again near the 30-year bottom of last fall:

United States MBA Purchase Index
Pic. 18

Retail sales in Germany are -1.4% per year, the 21st minus in a row. The longest negative series in 30 years of observation:

Germany Retail Sales YoY
Pic. 19

The number of unemployed people in Germany has increased monthly for 14 months in a row:

Germany Unemployment Change
Pic. 20

And already at the 8-year-old peak (excluding covid):

Germany Unemployed Persons
Pic. 21

As is the unemployment rate:

Germany Unemployment Rate
Pic. 22

The number of people receiving unemployment benefits in the US is very close to its peak in more than 2 years:

United States Continuing Jobless Claims
Pic. 23

However, as we have noted more than once, the level of distortion in labor statistics in the United States is extremely high. At the same time, distortions are aimed at improving the situation on the labor market, so such data indicate that, most likely, things are not very good, not to say very bad.

The Central Bank of Nigeria raised the rate by 4.00% to a record 22.75%. The Central Bank of New Zealand left its monetary policy unchanged.

Main conclusions. The conclusions of the previous review can be repeated and expanded upon. The structural crisis has reached a stable level; the authorities are no longer trying to hide it, since this is completely impossible. The differences from reality accumulated over the previous two years (caused precisely by attempts to pass off wishful thinking in the hope that the negativity will quickly dissipate) sometimes give rise to “splashes” of worsening performance. In general, as expected in a structural rather than cyclical decline, all significant indicators are persistently negative.

At the same time, there is no discussion of the reasons for this phenomenon in the public field. This suggests not only that liberal economics does not understand the causes of the structural crisis. The fact is that the topic of the crisis is blocked at the political level and there is an opinion that its discussion weakens the current political power in the G7 countries.

The lack of discussion of the problems and consequences of the economic crisis in the public sphere has an extremely negative impact on the ability of entrepreneurs to counteract it. And in this sense, we can only congratulate our readers who have found the source that keeps the topic of the crisis under constant surveillance. So we can wish them a peaceful weekend and a confident start to the upcoming work week!


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