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Capacity Utilization Plateaus Despite Ongoing Record Inventory Stocking
While there was little surprise in today's Industrial Production report, which rose 0.4%, on expectations of a 0.3% rise, however offset by last months' revision from -0.1% to -0.2%, it was the critical Capacity Utilization data that has some analysts concerned. But first, and continuing with the theme of "housing has bottomed", it is worth noting that of all the major market groups contributing to the overall index, only Construction saw a decline in June industrial production, dropping by 0.3%, following another drop of 1.4% in May. As for Capacity Utilization, it missed expectations materially, printing at 78.9% on expectations of the first 79%+ print (post revision) in 2012. In other words, the June number is the same as February's, following full year revisions that have taken down the maximum to 78.9 reached in February and April, and now June. In yet other words, even as the US continues stocking up on record amounts of inventory month after month, the business verticals are simply unable to expand. So with Cap Utilization having plateaued, will all the excess LIFO inventory be remarked to fair value? And what happens to corporate equities when a valuation allowance is taken to finally reflect reality?
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Time for some more channel stuffing and "stacking of things on top of other things" - see how productive we are? Now were is my bonus?
It's actually now easier to stack "things on top of things" since most containers have been down-sized in order for manufacturers to hold the line or only slightly increase their retail prices. Why do you think CPI has remained relatively in check for so long?
Correct. I was hoping someone might actually catch the reference and dig up a link to that Monty Python skit.
http://www.youtube.com/watch?v=1f-kfRREA8M
Fool! A pound has always been 12 ounces. Just ask Folgers......... Now there is a british pound, an american pound, and the retail pound. The retail pound isn't fixed like the other two.
The only place you're gonna get an 'honest ounce' these days is from your dope dealer.
"No rocks, no stones, no stems, no seeds
Alcapulco Gold is badass weed!"
Well, at least we will have stocked inventories to loot when the shit hits the fan.
It is surreal and comical to watch this thing unfold.
Reality? We only count unicorns around here..
long Winners
But Christmas is going to be huge...just huge...everyone is going to get a bottle of Greecian Olive oil for a present..or maybe feta cheese...no more fruit cakes...
Don't worry they are working on GAAP as we speak to reflect this. For instance "Inventory may be valued at whatever price it was supposed to have when it was built".
"Housing has bottomed"
a phrase that must be repeated by all who are falsifying their mortgage books to create the illusion of solvency.
Capacity utilization has never broken through 80% under Obama. But this might prompt the Fed to do more QE (which won't do any good).
http://confoundedinterest.wordpress.com/2012/07/17/capacity-utilization-stalls-at-78-9-will-the-fed-change-its-focus-to-job-creation/
But, but - the capacity of our Congress to load the MSM with Bullshit remains at 100%.
Executive branch as well.
Is that factored in?
Capacity utilization in a post-industrial economy is as useless as measuring agricultural output in an industrial economy. i.e. meaningless.
Ya best stock up on corn flakes while you still can!