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Charting The Unprecedented Decline In U.S. Manufacturing, And Other Economic Tidbits From Morgan Stanley
The attached slide deck from Morgan Stanley provides a convenient 5 minute summary of the current state of the global financial and economic picture. Discussing everything from fund flows (nearly $300 billion in domestic equity outflows since the beginning of 2007: strong like bull), to equity hedge fund outflows in Q2 (and fixed income and macro fund inflows), proceeding to the US economy, where the dip in final domestic demand is expected to follow the GDP inflection point shortly (does anyone even remember the disappointing Q2 GDP number posted a long, long time ago last Friday?), a consumer spending number that based on the current saving rate is unsustainable, to the endless rally in corporate profit margins as firms fire any and all non-essential overhead, to China's PMI drop, to Morgan Stanley's reiteration of the bullish Chinese groupthink, to observations of the exquisite correlations between the US ISM, China's PMI, and the MSCI EM Total Perf, the unprecedented decline in US manufacturing as a share of total world manufacturing (charted below), to a hockeystick projection for Emerging Markets where decoupling this time is most certainly different, and other useful, if not particularly original, tidbits of data.
Full presentation:
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Wow! That mfg. curve. It tells the story.
Not sure I understand the India/China part.
Area under the curve means India has a bigger mfg. base than China?
And final demand accelerating on schedule. That statement, to me, is the bane of the problem. Manufactured demand is the curse of the Supplynsidism we currently are suffering.
ORI
http://aadivaahan.wordpress.com
(Assuming you're not kidding about reading the curve--) apparently india and china are about equal at the moment, according to the graph. Every vertical slice represents 100% of manufacturing at any given time.
**edit: by "india" i meant india + all those others lumped in that group.
Thanks FB. I had read it wrong. Also, It's India, Brazil and others.
Big difference. I think I skimmed this one before commenting.
ORI
http://aadivaahan.wordpress.com
to all the wannabe chart monkeys out there... this is called a sand chart.
Yeah, I picked up on the India + others difference after my original comment...sorry I missed that.
So if global economies are tanking, and sovereigns defaulting or insolvent, what exactly is the rationale for owning bonds or equities in either?
+1
because the leemings' 401k options do not include anything else.
They have yet to eject from that (and many never will), take the tax hit, and put their money into something else.
So Europe is the biggest manufacturer right now.
Does anyone have a soft copy of this? I'd like to print this out...
this abc123 guy just enabled printing
I hope you've got plenty of ink in your printer. This report should have been sponsored by epson.
WE'RE IN ARECOVERY DAMMIT! NOW GET OUT THERE AND SPEND!
...no no no you got this all wrong. Its bad yes but it beats expectations so...its a positive. Bloomberg " Bernanke says consumer spending will increase as household income improves." You guys might as well close up shop.
The beauty is that Bernanke is not lying. He's just not telling *when* household income will improve... It may be still declining and even so he's still correct.
If you ask him "but is it improving now?" he'll mumble something that will not be yes or no.
There you have it. US manufacturing as a % of world output has been pretty much steady between 20-25% over the last 40 years. Where are all the "US Manufacturing has disppeared/is weak/is disappearing" detractors getting their info from???
People are confusing manufacturing jobs and manufacturing output. Big difference.
I would like to see a similar graph that shows what we are manufacturing and how that has moved over the past 40 years.
Exactly. My thoughts as well. Making pencils and wooden toys is not quite the same as precision lathes and electronics. Ask the Germans.
I did ask a German. The response I got was they sure wished they had stuck with buying pencils rather than JP enhanced Goldman Sachs of pixie dust.
I always had a problem putting together a clear picture of US manufacturing levels because all of the data seemed to be looking at the revenue of "manufacturing companies" and not the value added content from the US. For example, if US automanufacturers got all of their raw materials and components from China and then put them together in a screwdriver shop in the US, US manufacturing would get credit for 100% of the price of the final product while China would get 100% of the price of all of the components.
It made the end products statistics useless to me when forecasting where we would be selling materials used in electronic assembly. We had to go back up the chain and that information is a little more tightly guarded (with most of the published data being purely guesses).
While US manufacturing is very heavy into military hardware, aircraft, automobiles and other large ticket items that have very low relative labor contents (relatively few people employed per dollar of revenue), I'll bet that there is still a lot of value add from labor created in China that is counted as US manufacturing.
Interesting. Thanks for sharing.
I knew that Florida State had run into some tough times, but when did they partner up with Russia? For some reason I always figured Miami would be the one. Bowden sold his soul.
+6.5 (What FSU gets against UNC and GT this year).
Wow, That's a nice chart. It looks like the background from The Movie The Yellow Submarine. All that is missing is The Blue Meanies and The Glove.
I love the smell of hopium early in the morning. Especially when most of it will be destroyed by the release of econ data in the next few days. And yeah, it will oh yeat it will ...
Who cares about charts. In other opinions just flip the chart over and its bullish. It's all a matter of opinion. Zerohedge is ultimate bearish and will always have that angle. So far, from what I see the market things otherwise. What side would you rather be on? The winning side or the losing side?
It is a matter of *fact*. Opinions may differ based on knowledge or ignorance but that fact will always stay the same.
I always thought Morgan Stanley's strategy was to screw their clients and get bailed out by the taxpayers. Why bother making these Carebear colored charts?
It's from their HR department (the mug makers) and doubles as their new wall color scheme.
Which stocks are carrying this market, the only one I can think of is Ford for the dow... AAPL isn't moving, just flopping around... This is messed up.
More BS to advance the ideas that globalization is good. Everyone is a winner. Industry has been a western invention, these charts are garbadge.
Well said Segestan.
A nail-on-the-head statement.
I has been a WI, and these Cs are G!
ORI
http://aadivaahan.wordpress.com
I wonder when MS will include the total CUF of Wall Street in their assessment of US manufacturing and by what metrics will MS make their assessments?
Globalization = the soul crushing movement to make people into consumer robots whose lives have no meaning and purpose and whose only goal is to obey the matrix and go ever deeper into debt while swallowing wage losses periodically. It's a system that only favours the few over the vast majority. It won't end well, especially when people realize how badly they've been duped.
Looks to me like the Colonial experiment in America is about ready to be rolled up and put away. MFG >> Zero. And then there were none.
More, please. Sounds compelling, what do you mean?
deleted
unprecedented decline= plunge?
sorry leo :-)
meanwhile, a populist sighting worth mentioning. two bumper stickers...on a bentley.
"clean the house...AND the senate 2010"
"all the seats are the peoples seats"
And as our movement "keeps rolling along" many of you are working on a name. Latest entry submitted by, the Village Idiot, for your review -
"PROJECT HEY MAN"
No doubt, this will not be in the top five. keep It Rolling - and don't forget to pull the max from your ATM on August 12. Party on.
"Hey man, not on the rug..."
The monthly cumulative flow chart on page 3 makes me wonder whats going on here.
The period that had serious deflation is when the monthly flow decreased for all asset categories around sept 2008, but since 2009, bonds have been screaming upward.
Who has been selling those bonds and where has the money gone? Obviously some has more than back filled the decrease in domestic equity.
How much more growth is left in bonds? Are people just moving their MMFs to bond funds?
Just found this at ICI about MMF asset size, Retail & Institutional, millions of dollars,
1996 $901,807
1997 1,058,886
1998 1,351,678
1999 1,613,146
2000 1,845,248
2001 2,285,310
2002 2,265,075
2003 2,040,022
2004 1,901,336
2005 2,026,822
2006 2,338,451
2007 3,085,760
2008 3,832,236
2009 3,316,196
2010 2,801,500 As of July 28
So, I guess there is still a lot of potential to drive bonds higher.
That graph just cannot be correct. It shows China with a small slice, yet the non-oil trade deficit with China, just the U.S. is above 50%, up to 83%. Goods trade is the majority of the trade deficit, i.e. manufacturing.
Fun with numbers, or graphs for fun and profit 101, scale to misinform.
It's all context my man, context and flim-flam.
According to the chart, china's current (2009) slice is about the same size as the US, and has been rapidly growing for the past decade*. So maybe it's somewhat close to reality.
*edit: sorry, past 2 decades
Time for another world war to blow up the competition! We 'blowed' em up real good last time! ;-)
Interesting graphs over all, but not without usual investment banking bullish bullshit.
Page 6 - "Final Demand Accelerating on Schedule", that one. And then
Page 7 - "Deeper consumer recession + More Income = A Bigger Saving Cushion"
So that Richard Berner "US Economics" guy included the revised up savings rate but didn't bother with the revised down spending rate. Nice man, americans are saving more and spending more also. Looks better than that, definitely
http://www.bea.gov/national/pdf/briefingslides_NIPA_AR2010.pdf
Page 16 - Real personal consumption expenditures
accelerating on schedule my ass
That equity flow chart continues to keep me up at night...
One way to measure the decline in manufacturing in America is to find out what the payroll is for the manufacturing facilities, or at least the ones that are left.
This is a very dubious figure, though. My brother in law writes algorithms for a metrologist company. They analyse yield for semiconductor manufacturers. This is definitely a manufacturing job, but it looks like a software service company job.
i remember seeing a list of countries ranked by their GDPs....in different periods in history...INDIA was ranked number 1 from for most of the time and china 2nd ....it was around the time 1750 that india began slipping.....the englishman then landed.....and our GDP dropped from 22% in the world to 3 %.............and with so much corruption and other issues , i think the country has been destroyed ...it will take a long time to recover even if it does