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The Slippery Slope Of Denial

Tyler Durden's picture




 

Submitted by Jeffrey Snider via Alhambra Investment Partners,

The ISM Manufacturing PMI was “unexpectedly” weak yet again in September. Continuing the theme spelled out by the regional manufacturing surveys (the Fed’s and the Chicago BBI), economic momentum has clearly stalled right where the “dollar” said it would. The pattern is blindingly obvious, with a huge slowdown to start the year (coincident to the first “dollar” disruptions including crude oil prices), a pause around May/June (with the “dollar” much quieter after the March FOMC) and then a pickup in August and now more dramatic deceleration in September (after the July start to the latest “run”).

At just 50.2, the headline ISM estimate was the lowest since May 2013. New orders fell sharply from 51.7 in August (which was a multi-year low) to just 50.1. While most fixate on the assumed 50 level as an actual dividing line between growth and contraction, these sentiment surveys aren’t nearly that precise and at most offer relative interpretations about the economic direction, trends and the perhaps even the strength of those directions and trends.

ABOOK Sept 2015 ISM-US Demand PMIABOOK Sept 2015 ISM-US Demand PMI New Orders

With such ugly numbers everywhere, the mainstream is rushing to reassure:

The September numbers are the latest in a string of mixed reports for U.S. factories. The ISM index shows manufacturing activity has expanded for 33 straight months, though the pace has slowed markedly from last summer when it touched 58.1.

 

Other gauges have been weaker, with the Federal Reserve’s measure of manufacturing output down in August and a recent Commerce Department report showing a drop in exports of autos and consumer goods.

There was absolutely nothing “mixed” about factory reports in September unless you succumb to the allure of the false precision; everything is trending down and more importantly being rather quick about it. But even that is not purportedly anything to be concerned about because economists are certain that the problem lies only elsewhere:

The figures showed export demand matched the weakest since July 2012 as economies from China to the euro area struggle to improve. While resilient spending by U.S. consumers is helping underpin manufacturing, the stronger dollar is making it more expensive for foreign buyers to purchase made-in-America merchandise.

As if taken directly from Janet Yellen’s September press conference, particularly where she made a point of emphasizing the “strong” US economy (before reciting all the evidence that denies any such qualification), we are led to believe if not for that dollar the economy, manufacturing with it, would be booming.

By all actual counts, if there is a resiliency being shown by US consumers and the consumer economy it has a particularly peculiar way of hiding itself. If the word “strong” was applicable beyond the simple fact it is repeated over and over by economists, consumer spending would show it somewhere. Instead, examining the catalog of consumer indications demonstrates quite the opposite. Starting with retail sales, where August counted still among the worst of the entire series, there is far, far more recession than resilience. Worse, retail sales figures across-the-board in August were more of the early-2015 variety of weakness than the less alarm of the middle of the year, following, too, the “dollar’s” path.

ABOOK Sept 2015 Retail Sales ex Autos YYABOOK Sept 2015 Retail Sales Worst ex Autos

The mainstream “strong” narrative really falls apart, however, exactly where economists and the media suggest it shouldn’t. If the dollar were truly the sole animating factor in the shocking manufacturing decline, meaning overseas weakness exclusively, then how are we supposed to reconcile imports? In other words, if this was simply the dollar making US exports “more expensive”, as is repeated blindly, and overseas economies alone in their distress, why isn’t the “strong” US consumer buying anything and everything from foreign producers? If the dollar makes exports difficult, the opposite is presumably true for imports where US consumers are flush with at least the unemployment rate.

The export figures for July (the latest update) do follow that exchange rate suggestion. Exports collapsed yet again, down a stunning 7% for the second time in the last three months of the release. Export declines didn’t reach that level in the Great Recession until December 2008, but whereas that was a singular impulse, in 2015 exports so far have contracted steadily at or near that rate.

ABOOK Sept 2015 ISM-US Demand ExportsABOOK Sept 2015 ISM-US Demand Exports Longer

So if the dollar exchange is the problem, combined with foreign economic deficiencies, then imports are surely surging or at the very least growing at a “strong” and steady rate.

ABOOK Sept 2015 ISM-US Demand ImportsABOOK Sept 2015 ISM-US Demand Imports Longer

Imports from both Europe and China were flat in July, while imports from Japan, where the yen had been “devalued” a second time, dropped 6% after falling 5.5% in June. US demand seems to be shrinking at the same exact time foreign economies are stalling and plunging. That may just be a damned statistical oddity, or, more simply, the global economy is uniformly dropping with the US as a full part of that decline (“dollar”, after all).

ABOOK Sept 2015 ISM-US Demand China ImportsABOOK Sept 2015 ISM-US Demand Japan Imports

In fact, by count of even the seasonally-adjusted figures, imports are following exports a little too closely to believe that the looming (or formed) global recession is portionable or discretely separated.  The harmony between them strongly suggests instead a uniformity that can only be caused by a singular (financial) force.

ABOOK Sept 2015 ISM-US Demand SA

US consumer demand is strong, except everywhere you look to actually find it. Instead, what I think those who actually believe the mainstream narrative mean to proclaim is that there should be strong consumer demand given derivative assumptions about the Establishment Survey and unemployment rate. That is why we have been handed this cascading progression of downplaying each stage. Therefore, the only significance of these diminishing expectations is that they are clearly diminishing; and the acceleration of that deterioration might be extrapolated from the increasing intensity and quality of the nonsense meant to deny it.

As noted yesterday, this is already well-descended the slippery slope of denial, plus one more rung:

1. Dollar doesn’t matter, indicates strong economy relative to the world
2. Dollar matters for oil, but lower oil prices mean stronger consumer
3. Manufacturing slump doesn’t matter, only temporary
4. Manufacturing declines are consumer spending, but only a small part
5. Manufacturing declines are becoming serious, but only from overseas
6. …

 

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Fri, 10/02/2015 - 15:57 | 6622337 Skyprince
Skyprince's picture

All this truthiness is making me hungry.  Is it lunchtime yet?

 

Fri, 10/02/2015 - 16:06 | 6622381 abyssinian
abyssinian's picture

The Feds is ordering record amounts of ink for QE4 -QE2000 no wonder all the scams are buying stocks. 

Fri, 10/02/2015 - 16:13 | 6622441 Redneck Hippy
Redneck Hippy's picture

Meg Whitman says that ink sales are an important economic indicator. Now we know why.

Fri, 10/02/2015 - 15:57 | 6622340 dimwitted economist
dimwitted economist's picture

the stock market went UP Today!

Fri, 10/02/2015 - 15:58 | 6622344 Skyprince
Skyprince's picture

The scent of QE is in the air perhaps?

 

Fri, 10/02/2015 - 16:05 | 6622360 khakuda
khakuda's picture

Yup.  Bad news is great news for the stock market because it guarantees free money for much longer.  The thing has tripled on bad news since 2008.  Starve the real economy and granny of income and give it to the government and wall street.  Seven years?  That old bag ain't seen nothing yet.  Nice, huh?

Fri, 10/02/2015 - 15:58 | 6622347 RopeADope
RopeADope's picture

Someone is slacking, we should be closing at 1975 in the S&P 500...

Fri, 10/02/2015 - 16:06 | 6622384 will ling
will ling's picture

nothin' beats free money.

Fri, 10/02/2015 - 17:25 | 6622753 Crocodile
Crocodile's picture

Up today and down on Monday, then rinse & repeat...the new normal.

Fri, 10/02/2015 - 16:26 | 6622354 Ham-bone
Ham-bone's picture

Despite $400 billion in 2015 "stimulus" the US (and global) economy is slowing and heading for recession.

When Congress raises the debt ceiling in December...all the "stimulus" of spending above and beyond tax revenue since May absent dollars collected for this spending will need to be resolved.

Who's been buying and who will buy this time? 

Why the Fed's likely answer to extend and pretend is NIRP!

http://seekingalpha.com/article/3548606-todays-stimulus-and-who-will-pay-tomorrows-bills

Fri, 10/02/2015 - 17:06 | 6622660 Crocodile
Crocodile's picture

The bills do not matter; it is the INTEREST on those bills that matter and we are still a ways from reaching that point.  Everyone will have a price to pay at the end, for this life is a mere shadow of the eternal (absent of time) state to come and the eternal is the substance.  So this life matters for all of us.

Fri, 10/02/2015 - 16:03 | 6622366 JTBfromtheWL
JTBfromtheWL's picture

It's all temporary...until everything is gone.

Fri, 10/02/2015 - 16:04 | 6622369 Consuelo
Consuelo's picture

Damned 'NSA' seems to be involved in everything these days...

Fri, 10/02/2015 - 16:20 | 6622468 RopeADope
RopeADope's picture

That was kinda the point of removing the anonymizing feature on the data stream.

It was ALWAYS about money, NEVER about security.

In a zero growth world your 'edge' will come from getting ahead of competition. Thus we have NSA programs which 100,000s of consultants pay to access.

Fri, 10/02/2015 - 16:11 | 6622419 adr
adr's picture

Isn't it amazing how you can have such a decline in retail sales during the spring months of 2009 and then have the stock market spring back to life and soar exponentially higher from Q2 2009.

All the corporations with declining sales all of a sudden posted huge numbers. Like Select Comfort which was going deep in debt and somehow had a $200 million dollar swing in sales from Q2 to Q3. Like everyone with absolutely no money during the steepest downturn in 80 years all went out and said, YEAH I WANT A FUCKING $2000 MATTRESS.

I'm sure the change from Mark to Market to Mark to Fantasy had nothign to do with the huge swing in the accounting ledger. I'm also sure that the Fed pumping a few trillions dollars through banks so they could buy shares had nothing to do with it either.

I'm sure if the Fed didn't inject money, things like a company such as Diedrich Coffee seeing their shares climb 3800% after another coffee company offers to buy them out would have just happened anyway. Maybe it's just because the algos saw something called DIED RICH and started buying.

I SAY FUCK IT. END THIS SHITSHOW ONCE AND FOR ALL.

Fri, 10/02/2015 - 16:16 | 6622428 The Indelicate ...
The Indelicate Genius's picture

Funny how negative rates is gently, lovingly floated by the banks but never haircuts or even interest freezes [let alone repudiation].

let's recall - most of the debt {and the interest compounding thereon} originated from debt-money - money loaned into existence out of thin air.

It is, ergo, and to that extent, odious, and void ab initio, and other pleasing-sounding Latin things.

Scientia potentia est,

Amen.

Fri, 10/02/2015 - 16:34 | 6622519 silverer
silverer's picture

When you have a group of people in power that are taking over half the planet with printed paper, they will keep it going at ANY cost.  Lies, BS, outright theft and lawbreaking.  We see it every day.  When in-your-face lawbreaking by the elites goes unpunished, then you should realize that anything can happen.  And likely, anything bad will happen to you, not them.

Fri, 10/02/2015 - 17:01 | 6622632 Crocodile
Crocodile's picture

All nations have done this in the past and will continue to do so, for it is only the scale or degrees that seem to change; you don't get to the top of any heap, except one, apart from being morally bankrupt to the core.  So it is with most people in their individual lives as well since morality has become "relative" as opposed to "fixed".  Very sad state of affairs imo.

Fri, 10/02/2015 - 17:27 | 6622622 Crocodile
Crocodile's picture

This is obviously a controlled slow burn, which means the Lehman event has already taken place (actually never ended) and all the back-door mechanisms (financial, psyops/propaganda, other covert military activities) and more are full throttle UNTIL they can get us into WAR. 

 

Expect the Obama administration to begin to really ratchet things up on demonizing Russia, China, a little on Iran (got to be careful there) and many false flag events will come in rapid-fire speed.  Events will be targeted on corporations that may be rogue (i.e. VW - message to Germans) in the administrations viewpoint. 

 

Remember that nations are corporations and people are either assets or liabilities of a corporation.  As the balance sheet is bloated with liabilities, then you remove those liabilities (i.e. the poor & unemployed) via all means necessary.

Fri, 10/02/2015 - 16:59 | 6622625 agent default
agent default's picture

 

  • Denial and Shock -
  • Anger, Rage -
  • Stress and Depression -
  • Grief and Fear -
  • Acceptance, Adjustment -

 

The five emotional stages of cancer. 

And collapsing empire.

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