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Stagflation Trifecta Complete: Industrial Production Misses Expectations

Tyler Durden's picture




 

Stagflation trifecta complete: May Industrial Production misses downward revised expectations of +0.2%, barely budging from last month's unchanged, printing at 0.1%, in line with our expectation from mid May, and in contrast with every lemming on Wall Stret. The bulk of the weakness was blamed on Japan. The balance is apparently due to tornadoes. Of course, since the economy is in a vacuu and is never impacted by such "one time" items, it is easy to assume there will never be any earthquakes or tornadoes going forward. From the release: "Industrial production edged up 0.1 percent in May, the second
consecutive month with little or no gain. Revisions to total industrial
production in months before May were small. In May, manufacturing
production rose 0.4 percent after having fallen 0.5 percent in April.
The output of motor vehicles and parts has been held down in the past
two months because of supply chain disruptions following the earthquake
in Japan. Excluding motor vehicles and parts, manufacturing output
advanced 0.6 percent in May and edged down 0.1 percent in April; the
decrease in April in part reflected production lost because of tornadoes
in the South at the end of the month." And in other persistently weak news,  Capacity Utilization for total industry was flat at 76.7 percent, a
rate 3.7 percentage points below its average from 1972 to 2010
.
Two more months of data as week as this and QE3 is not only probable but inevitable. 

 

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Wed, 06/15/2011 - 09:35 | 1370632 Fancy Bear
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Perfect. Now let's just hope Gold and ES continue to go their separate ways.

Wed, 06/15/2011 - 09:32 | 1370636 ZeroPower
ZeroPower's picture

Strange indeed... from virtually +1 to -1.

Wed, 06/15/2011 - 09:37 | 1370640 Fancy Bear
Fancy Bear's picture

I think they turned off the bots that saw them both as inverse to the dollar.

Wed, 06/15/2011 - 09:37 | 1370658 firstdivision
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I wouldn't bet on it.  The correlation will snap back to in-line with historical levels.  Much like the 10Y-yield and the market is now coming back in line http://stockcharts.com/h-sc/ui?s=$SPX&p=D&b=5&g=0&id=p81971659116

Wed, 06/15/2011 - 09:34 | 1370643 So Close
So Close's picture

Google "carmen reinhart financial repression"

Wed, 06/15/2011 - 09:38 | 1370646 Village Smithy
Village Smithy's picture

I think that declining auto production being blamed on supply chain problems is BS. If GM has stuffed its dealers so full of inventory that they parking cars in abandoned strip malls, this "supply chain" problem is just cover.

Wed, 06/15/2011 - 09:41 | 1370672 SheepDog-One
SheepDog-One's picture

'Supply chain problem' insinuates demand for cars cant be met because their production is being hindered by lack of supplies? Total garbage, dealer lots are stuffed to bursting with GM vehicles.

Wed, 06/15/2011 - 09:50 | 1370702 Ergo
Ergo's picture

Anecdote:  Last month, we went to see Chevy Tahoes here in Houston.  There were 2 rows of Tahoes as far as the eye could see.  (I told my wife about channel stuffing before we went)  I asked what incentives they had, and the salesman gave us some piddly amount (less than 2k from sticker).  I asked what the cash incentive was, and he said that was it ... b/c ... they just can't keep them on the lot.  Said it with a straight face too, as I looked down the long rows of cars.  We thanked him and left.  It's cheaper to buy a luxury brand. 

Government Motors isn't serious about selling cars.  Here's another laugher - their EPA rating. 15 MPG city driving for a v8 5.3 liter.  No way that's even close.   

Wed, 06/15/2011 - 09:49 | 1370653 Mercury
Mercury's picture

Fed In A Box

via WSJ:

Economist Lawrence B. Lindsey writing in the Weekly Standard, June 13:

Right now, thanks in large part to Federal Reserve policy, Uncle Sam can borrow at an average cost of just 2.5 percent. The average borrowing cost over the last three decades was 5.7 percent. Our debt is now $14 trillion and scheduled to grow to $25 trillion by the end of the decade. If interest rates normalize over that period the added interest costs in 2021 alone will be $800 billion—more than 20 times the mere $37 billion in budget cuts that tore up Congress in March. It would take virtually all of the cuts in the Ryan budget just to cover that added interest, much less to start bringing down the national debt. Unfortunately, the Fed is now in a fiscal box. A normalization of interest rates would break the Treasury. Hence, a normalization of rates really can't happen—we're stuck in a world in which the Fed must keep rates artificially low in order to prevent a budget disaster.

Wed, 06/15/2011 - 09:41 | 1370656 So Close
So Close's picture

LOL..... Krugman said of Financial Repression.... 

"I have seen the past.. and it worked."

http://krugman.blogs.nytimes.com/2011/06/02/financial-repression/

 

Wed, 06/15/2011 - 09:39 | 1370661 SheepDog-One
SheepDog-One's picture

Cant somebody just choke out Krugman the butthole once and for all?

Wed, 06/15/2011 - 09:46 | 1370678 topcallingtroll
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go troll him like I do every once in a while.

But I troll respectfully on the NYT because I want the sheeple to see that there is an alternative viewpoint.

Everybody on zero hedge should troll the krugman.  that would be funny if there were multiple erudite explanations of how these solutions he proposes won't work anymore.  The transmission mechanism is broken, so pushing harder may just cause crazy shit to happen

Wed, 06/15/2011 - 12:07 | 1371297 I_ate_the_crow
I_ate_the_crow's picture

So I suppose "Hey Paul, does The Bernanke's beard tickle your balls?" wouldn't help our cause....

Wed, 06/15/2011 - 09:41 | 1370659 SheepDog-One
SheepDog-One's picture

HOW could industrial production miss? We're america the industrial superpower! Oh wait I forgot, we sold all those factories and manufacturing off for money borrowing over the last few decades. 

 

Wed, 06/15/2011 - 09:44 | 1370668 topcallingtroll
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yeah...cause running up the credit card that China and Japan provided was a lot easier than actually working and saving for what people want.

The politicians promised that free money would continue forever!  What happened?

Wed, 06/15/2011 - 09:42 | 1370679 EscapeKey
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Oh, they just failed to mention only a few percent of the population is given access to the free money.

Wed, 06/15/2011 - 09:43 | 1370663 PaperBear
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Gold/silver just popped higher.

More signs that the economy is going into the toilet and will need more QE is the likely culprit.

Wed, 06/15/2011 - 09:43 | 1370680 SheepDog-One
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Each QE just serves to put a firm floor under gold a few hundred higher.

Wed, 06/15/2011 - 09:40 | 1370670 Jason T
Jason T's picture

ZH should run a poll: Agree or Disagree with the Iranian President?

http://www.jpost.com/DiplomacyAndPolitics/Article.aspx?id=225084

Wed, 06/15/2011 - 09:43 | 1370682 Jason T
Jason T's picture

Reminds me of the movie Love and Dealth..woody allen, (big fan of Woody) when his charactor confronts Napolian and says "you're a tyrannt, brutal dictator", ... " and Napolian replies, "why are you reciting my credits?"

Wed, 06/15/2011 - 10:16 | 1370802 Arnolds Love Child
Arnolds Love Child's picture

agree

Wed, 06/15/2011 - 09:43 | 1370673 alien-IQ
alien-IQ's picture

the 10am housing market index report should send the /ES off the 1270 cliff to test 1261-1265 range...then petroleum status at 10:30 could make today a truly gorgeous blood bath.

Wed, 06/15/2011 - 09:45 | 1370674 Internet Tough Guy
Internet Tough Guy's picture

Tornados. What a joke

Wed, 06/15/2011 - 09:45 | 1370677 A Man without Q...
A Man without Qualities's picture

Isn't stagflation made worse by QE?  A lack of decent yielding assets plus a desire to devalue the currency, with no transmission mechanism to the consumer, can only result in higher commodity prices, margin compression, lower disposable incomes and therefore constrained hiring, spending.

But then I don't have an economics PhD, so perhaps I should just be quiet and leave it to the experts.

Wed, 06/15/2011 - 09:45 | 1370692 SheepDog-One
SheepDog-One's picture

They can only juggle price stability (if you can call wildly higher food and gas prices stable) and vast money printing for so long, I think theyre at their end right before it all comes crashing down.

Wed, 06/15/2011 - 09:59 | 1370740 A Man without Q...
A Man without Qualities's picture

"There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as a result of the voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved."

The banks prefer option 2, because at least that way they live to fight another day.  Option 1, will mean certain collapse of the banking system...

 

 

Wed, 06/15/2011 - 09:43 | 1370684 Bastiat
Bastiat's picture

Stagflation seems too polite; "fuckflation" better describes the situation.

Wed, 06/15/2011 - 10:04 | 1370745 lizzy36
lizzy36's picture

I think fuckflation is what happens when one has been married for longer than 10 years.

Pure guess on my part.

Wed, 06/15/2011 - 10:05 | 1370764 firstdivision
firstdivision's picture

I thought dating was fuckflation, and marriage is defuckflation. 

Wed, 06/15/2011 - 10:17 | 1370791 Bastiat
Bastiat's picture

Decrease in supply so increase in value? Hmmm.  Deep.  I think the price elasticity of supply and demand is variable, too.

Wed, 06/15/2011 - 10:12 | 1370783 Bastiat
Bastiat's picture

Increase in the supply, so decrease in the value?

Wed, 06/15/2011 - 11:38 | 1371173 Fancy Bear
Fancy Bear's picture

Hence open marriages. Increased demand from new markets drives the price back up.

Wed, 06/15/2011 - 09:49 | 1370696 SheepDog-One
SheepDog-One's picture

Anyone see any 'smoothing mechanisms' yet today?

Wed, 06/15/2011 - 10:59 | 1370997 A Man without Q...
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Someone's gone through and junked every comment on this thread, except this one - which would suggest the junker has constipation or maybe hemorrhoids... 

Wed, 06/15/2011 - 09:49 | 1370697 sheep92
sheep92's picture

Interesting that with 'miss' in industrial production and spy 10 handles lower that the steel stocks are green.  copper is barely lower even as the dollar soars.

the markets at least for today are not jiving with the headlines.

Wed, 06/15/2011 - 12:05 | 1371286 AldoHux_IV
AldoHux_IV's picture

Stagflation: those on the inside (aka crony capitalists) win and economic death and despair for everyone else.

Wed, 06/15/2011 - 17:09 | 1372618 slewie the pi-rat
slewie the pi-rat's picture

it has only been 3 months, so far.  "they" are still calling it the "earthquake in japan" rather than an ongoing horrible nuclear disaster.  they got the supply chain disruption right...

the implication seems to be that the "disruptions from the events" are economically manageable.

but:  clusterflocks tend toward gnarly now and again, too.

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