This page has been archived and commenting is disabled.

Charting The Unprecedented Decline In U.S. Manufacturing, And Other Economic Tidbits From Morgan Stanley

Tyler Durden's picture




 

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:

 

 

- advertisements -

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Mon, 08/02/2010 - 12:47 | 499745 Oh regional Indian
Oh regional Indian's picture

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

Mon, 08/02/2010 - 13:49 | 499868 faustian bargain
faustian bargain's picture

(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.

Mon, 08/02/2010 - 13:51 | 499892 Oh regional Indian
Oh regional Indian's picture

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

Mon, 08/02/2010 - 14:17 | 499930 greased up deaf guy
greased up deaf guy's picture

to all the wannabe chart monkeys out there... this is called a sand chart.

Mon, 08/02/2010 - 14:59 | 499988 faustian bargain
faustian bargain's picture

Yeah, I picked up on the India + others difference after my original comment...sorry I missed that.

Mon, 08/02/2010 - 12:43 | 499748 ATG
ATG's picture

So if global economies are tanking, and sovereigns defaulting or insolvent, what exactly is the rationale for owning bonds or equities in either?

Mon, 08/02/2010 - 13:15 | 499815 Spitzer
Spitzer's picture

+1

Mon, 08/02/2010 - 13:23 | 499825 LeBalance
LeBalance's picture

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.

Mon, 08/02/2010 - 12:44 | 499750 kaiten
kaiten's picture

So Europe is the biggest manufacturer right now.

Mon, 08/02/2010 - 12:46 | 499755 RobertC
RobertC's picture

Does anyone have a soft copy of this?  I'd like to print this out... 

Mon, 08/02/2010 - 12:47 | 499758 Tyler Durden
Tyler Durden's picture

this abc123 guy just enabled printing

Mon, 08/02/2010 - 18:41 | 500280 Narcolepzzzzzz
Narcolepzzzzzz's picture

I hope you've got plenty of ink in your printer. This report should have been sponsored by epson.

Mon, 08/02/2010 - 12:46 | 499756 Misean
Misean's picture

WE'RE IN ARECOVERY DAMMIT! NOW GET OUT THERE AND SPEND!

Mon, 08/02/2010 - 12:48 | 499761 Votewithabullet
Votewithabullet's picture

...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.

Mon, 08/02/2010 - 12:58 | 499780 nonclaim
nonclaim's picture

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.

Mon, 08/02/2010 - 12:52 | 499771 godfader
godfader's picture

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.

Mon, 08/02/2010 - 13:03 | 499795 kridkrid
kridkrid's picture

I would like to see a similar graph that shows what we are manufacturing and how that has moved over the past 40 years. 

Mon, 08/02/2010 - 13:28 | 499837 RockyRacoon
RockyRacoon's picture

Exactly.  My thoughts as well.  Making pencils and wooden toys is not quite the same as precision lathes and electronics.  Ask the Germans.

Mon, 08/02/2010 - 14:30 | 499953 Miles Kendig
Miles Kendig's picture

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. 

Mon, 08/02/2010 - 14:00 | 499911 Bartanist
Bartanist's picture

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.

Mon, 08/02/2010 - 14:28 | 499944 kridkrid
kridkrid's picture

Interesting.  Thanks for sharing. 

Mon, 08/02/2010 - 12:52 | 499774 kridkrid
kridkrid's picture

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.

Mon, 08/02/2010 - 13:47 | 499885 Captain Queeg
Captain Queeg's picture

+6.5 (What FSU gets against UNC and GT this year).

Mon, 08/02/2010 - 12:59 | 499776 plocequ1
plocequ1's picture

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.

Mon, 08/02/2010 - 12:59 | 499788 Comrade de Chaos
Comrade de Chaos's picture

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 ...

Mon, 08/02/2010 - 13:00 | 499791 PatsPal
PatsPal's picture

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?

Mon, 08/02/2010 - 13:10 | 499805 nonclaim
nonclaim's picture

It is a matter of *fact*. Opinions may differ based on knowledge or ignorance but that fact will always stay the same.

Mon, 08/02/2010 - 13:07 | 499799 Cojones
Cojones's picture

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? 

Mon, 08/02/2010 - 13:25 | 499833 LeBalance
LeBalance's picture

It's from their HR department (the mug makers) and doubles as their new wall color scheme.

Mon, 08/02/2010 - 13:09 | 499801 Young
Young's picture

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.

Mon, 08/02/2010 - 13:09 | 499802 Segestan
Segestan's picture

More BS to advance the ideas that globalization is good. Everyone is a winner. Industry has been a western invention, these charts are garbadge.

Mon, 08/02/2010 - 13:56 | 499904 Oh regional Indian
Oh regional Indian's picture

Well said Segestan.

A nail-on-the-head statement.

I has been a WI, and these Cs are G!

 

ORI

http://aadivaahan.wordpress.com

 

Mon, 08/02/2010 - 13:10 | 499803 Miles Kendig
Miles Kendig's picture

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?

Mon, 08/02/2010 - 13:21 | 499822 VK
VK's picture

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.

Mon, 08/02/2010 - 13:26 | 499835 LeBalance
LeBalance's picture

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.

Mon, 08/02/2010 - 13:31 | 499846 kridkrid
kridkrid's picture

More, please.  Sounds compelling, what do you mean?

Mon, 08/02/2010 - 13:27 | 499836 Village Idiot
Village Idiot's picture

deleted                     

 

Mon, 08/02/2010 - 13:28 | 499840 doomandbloom
doomandbloom's picture

unprecedented decline= plunge?

sorry leo :-)

Mon, 08/02/2010 - 13:57 | 499842 Village Idiot
Village Idiot's picture

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"

  •  a play on project mayhem (mayhem already used)
  •  a reference to the "man" (multi generational meaning of power elite)
  •  the elusive double entendre (hey man, we know what you're up to) 
  •  passive/aggressive "elegance"

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.

Mon, 08/02/2010 - 15:02 | 499991 faustian bargain
faustian bargain's picture

"Hey man, not on the rug..."

Mon, 08/02/2010 - 14:02 | 499873 bada boom
bada boom's picture

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?

Mon, 08/02/2010 - 14:51 | 499963 bada boom
bada boom's picture

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.

Mon, 08/02/2010 - 14:25 | 499942 Robert Oak
Robert Oak's picture

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.

Mon, 08/02/2010 - 14:46 | 499964 old_turk
old_turk's picture

Fun with numbers, or graphs for fun and profit 101, scale to misinform.

 

It's all context my man, context and flim-flam.

Mon, 08/02/2010 - 16:36 | 500126 faustian bargain
faustian bargain's picture

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

Mon, 08/02/2010 - 14:34 | 499959 deepsouthdoug
deepsouthdoug's picture

Time for another world war to blow up the competition!  We 'blowed' em up real good last time!  ;-) 

Mon, 08/02/2010 - 16:15 | 500103 jesusonline
jesusonline's picture

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

 

Mon, 08/02/2010 - 17:11 | 500190 Boba Fett
Boba Fett's picture

That equity flow chart continues to keep me up at night...

Mon, 08/02/2010 - 20:54 | 500408 wkwillis
wkwillis's picture

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.

Tue, 08/03/2010 - 02:24 | 500597 Tense INDIAN
Tense INDIAN's picture

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

Do NOT follow this link or you will be banned from the site!