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Rosenberg On The Pending Trade Shock And Q4's 0% GDP Growth

Tyler Durden's picture





 

It would appear that the dilemma of the world exporting more than it imports (that we initially pointed out here) is starting to come to a head in reality with a negative export trade shock. As Gluskin Sheff's David Rosenberg notes, since the recovery began three years ago, over 70% of the real GDP growth we have seen was concentrated in export volumes and inventory investment; and recent data from the ISM (here and here) points to a dramatic slowdown in both. Compounding this weakness is the fact that the remaining growth was from Capex - which is now likely to slow given the weakening trend in corporate profits - and will more than offset any nascent turnaround in the housing sector - if that is to be believed. The consumer has all but stalled and adding up all these effects and there is a high probability of a 0% GDP growth print as early as Q4.

 

Macro Risks Squarely To The Downside

I think that there may be a time, before too long, when we will walk into the office to find that the US prints a negative GDP reading on the back of a negative export trade shock that does not appear to be in any forecast - let alone consensus.

 

Look at the pattern of ISM export orders:

  • April: 59.0
  • May: 53.5
  • June: 47.5
  • July: 46.5

That is called a pattern. And this is a level that coincided with the prior two recession. As the chart below vividly illustrates, there is a significant 81% correlation between annual growth in total US exports and the ISM new orders index (with a four month lag). So either the market has already priced this in or it is going to end up coming as a very big surprise. We are already seeing the lagged effects of the spreading and deepening European recession hit Asian trade-flows: Korean exports sagged 4.1% in July after a 3.7% slide in June and are down 9% on a YoY basis. Industrial production there edged lower by 0.4% as well last month - I like to look at Korea since it is a real global 'play' on the economic cycle.

 

There is likely going to be another surprise, which is inventory destocking. How do I know that? Because the share of ISM industries polled in July reported that customer inventories were excessively high soared to 33% in July from 11% a year ago (because this metric is not seasonally adjusted it can only be assessed year-on-year), the highest ever for any July in the historical database.

 

Add to that what is happening to order books - the share of the manufacturers reporting expanded orders sank to 17% in July from 50% a year ago and again - the worst July showing on record.

 

The food price situation is another major wild card, especially since whatever relief we enjoyed from lower gasoline prices is now behind us. At a 14% share of the consumer spending pie, only shelter is more important than food. And when you go back to the last food cost surge, in the first quarter of 2011 when the grocery bill soared at a punishing 10% annual rate, real GDP growth slowed to a 0.0% annual rate that quarter, which arguably was the big surprise of the year (up until the dent downgrade, that is).

 

In the final analysis, since the 'recovery' began three years ago, over 70% of real GDP growth we have seen was concentrated in these two areas: export volumes and inventory investment. The rest was in capex which is now likely to slow along with the weakening trend in corporate profits, more than offsetting the nascent turnaround in the housing sector. Also keep in mind that the consumer has stalled.

Tally all these effects up and you are looking at the prospects of 0% growth as early as Q4.

 


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Wed, 08/08/2012 - 20:14 | Link to Comment CunnyFunt
CunnyFunt's picture

That reads as bullish. SPY 200?

Wed, 08/08/2012 - 20:18 | Link to Comment The Monkey
The Monkey's picture

Seriously. Next up are all central banks. They won't stand by without levitating assets (even though everything is already reflated).

Wed, 08/08/2012 - 21:54 | Link to Comment slewie the pi-rat
slewie the pi-rat's picture

a FIF0 for two LIF0

take it leave it, BiCheZ!

Wed, 08/08/2012 - 20:15 | Link to Comment monopoly
monopoly's picture

Would someone please explain to me when the recession was over? In my state it never ended. Next stop, depression. 

When you lose your good paying job, lose your home, eat up your savings and take any job that you can get since your 99 weeks are over, that is Not a recession?

If this is the 4th year of the recovery I sure cannot wait for the 5th year recovery. What wonderful surprises will our govt. have for us next year. 

Wed, 08/08/2012 - 20:22 | Link to Comment Ignorance is bliss
Ignorance is bliss's picture

There in lies the problem. We are waiting for the Gov't to do something.

Wed, 08/08/2012 - 20:30 | Link to Comment SKY85hawk
SKY85hawk's picture

Their denial has already sealed our fate!

 

Wed, 08/08/2012 - 21:49 | Link to Comment FMR Bankster
FMR Bankster's picture

This is what's called a depression. It's different than a recession because it involves a debt unwind in the private sector. In the 1930's we had the first ugly downturn from 29 to 33, then what looked like a pathetic recovery but at least it was statistically better, then the next downturn in 37-38. Things were still real, real bad 9 years after the crash. Hopefully we won't screw things up as badly as Japan has or we'll still be discussing this in 2028.

Wed, 08/08/2012 - 23:06 | Link to Comment bankruptcylawyer
bankruptcylawyer's picture

we will be discussing 2028 in 2228. what's happening now is going to have consequenes in another 15 years or so.

global war will somehow erupt by then.

almost inevitable.

just a matter of whether it goes nuclear or not. either way, the food supply chain will be disrupted, hundreds of millions will die. starvation is the biggest cause of death during warfare. always.

Wed, 08/08/2012 - 21:59 | Link to Comment slewie the pi-rat
slewie the pi-rat's picture

organic food stamps?

Wed, 08/08/2012 - 23:52 | Link to Comment StychoKiller
StychoKiller's picture

Mmm, edible food stamps!  Go long termite-DNA-modified Humanz!

Wed, 08/08/2012 - 20:31 | Link to Comment lotsoffun
lotsoffun's picture

anybody waiting for GOV. to do anything for them might as well go sit in the desert with moses and pray for manna.  billie holiday wrote a song generations ago 'god bless the child that's got his own'.  if you can't take care of yourself, you can't take care of your family.  and then you can't expand that to your community.  it's that simple.

 

Wed, 08/08/2012 - 20:54 | Link to Comment Eric L. Prentis
Eric L. Prentis's picture

Yes, I would like the government to enforce the fraud laws, to get the social psychopathic banksters off the economy’s back.

Government, repeal this list of credit crisis enabling legislation:

  • Gramm–Leach–Bliley Financial Services Modernization Act of 1999
  • Commodity Futures Modernization Act of 2000
  • Bankruptcy Abuse Prevention and Consumer Protection Act of 2005
  • Jumpstart Our Business Startups (JOBS) Act of 2012

Government, pass laws that do not encourage big business to send jobs abroad, start with NAFTA.

 

Wed, 08/08/2012 - 23:34 | Link to Comment PD Quig
PD Quig's picture

Yeah, Dude Government, like pass some laws to repeal price discovery and labor supply and demand. I'm gettin' pissed at all those Asians who are as smart as I am but who will work for far less than me. Repeal NAFTA and Santa too--all those fuckin' elves doing jobs that Americans would do if we hadn't passed all those laws that encourage big business to send jobs to the North Pole.

You can keep your jobs here, Blinky...for just as long as it takes for the company to go bankrupt because they're undercut by lower labor costs. You want to fix something, try eliminating the corporate taxes (that are actually paid by employees and customers). Try eliminating the assinine regulations that cost US businesses $1 trillion annually in compliance costs. THAT'S where your fucking jobs went, Larry Larson.

I'm surrounded by dumbkashitz...

Wed, 08/08/2012 - 20:28 | Link to Comment SKY85hawk
SKY85hawk's picture

POTUS, whosomever, will solemly declare WE HAVE SOME BIG PROBLEMS HERE!, in January 2013.

The solutions will seem like we're in GREECE . . .

Wed, 08/08/2012 - 21:44 | Link to Comment TBT or not TBT
TBT or not TBT's picture

Either TOTUS will address us, or it will be Romney speaking his own mind, we'll see.

Wed, 08/08/2012 - 20:29 | Link to Comment lotsoffun
lotsoffun's picture

don't take it personal - but that's YOUR experience.  where i live, there are plenty of people that haven't had jobs for generations, but they've got i-toys and suv's and apartments and flat panels and all look a lot fatter then i do.  and pretty happy too.

not sure i'm sure how it all worked out like that but, it did.

however, i do agree with you.  i'm very fortunate to have a job, and jobs keep changing, and pay keeps inching down.  and my savings earn .04% and bennie really does wish i'd either spend it, or buy some stocks.  but i'm hanging in.

i'd actually vote for big bad bama - cuze - i want him to go into the history books.

 

Wed, 08/08/2012 - 20:54 | Link to Comment CABill
CABill's picture

Obama will go into the history books as the president who actually thought 'Hope' could replace 'Competency'.

So far 'I hope my bills get paid', isn't working.  

The only way the S&P isn't half (it's true value), is by continuous blood transfusions by the Fed, which isn't a cure.

Obama has GOT to go - One and Done.

Thu, 08/09/2012 - 06:38 | Link to Comment northerngirl
northerngirl's picture

In the state in which I live, a family of 4 receives over $60k a year in total government benefits.  That is more than their case worker makes in a year.  I'm not sure if this is a result of big goverment, or people just giving up?  Either way this is not good.

Thu, 08/09/2012 - 20:56 | Link to Comment lotsoffun
lotsoffun's picture

n-girl - probably you don't see this, or nobody does, but - it's all spin.  because, if a family of receives 60k in benefits, and the case worker makes less - well really, that's only 15k per/person.  so she's doing better.  but the most important thing is this.  she decided to work.  if she wants to work, THAT'S GREAT!.  but - if you don't want to work, why should you suffer?  and if the family of 4 is 3 kids and a mom, well, she decided to be a mom, and how can she care for her kids, if she works.

get it?

and at the point that the family of 4 with no job and no dad is norm, and anybody can vote, and they out way responsible people, well, did you get it?  and who are you voting for?

so - not only is unemployment good - because they have more time to shop, well spend everypenny given to them at wallmart, will spend all day infront of the t.v. watching ad's for junk food (meaning they won't ever think to buy raw ingredients and cook and not weigh 50% overweight, and they have the time, remember, so you really have to advertise hard to destroy that).  etc. etc.

it's over.  the brain is the t.v.

i keep hoping for hope and change, but the hope and change is and advert for the man that wants the most people possible on his hand outs.

not that republicans offer anything better, because the t.v. and the banks own them also.  it's sad

 

Wed, 08/08/2012 - 20:16 | Link to Comment Muppet Pimp
Muppet Pimp's picture

Clearly this is transitory Rosie.

Wed, 08/08/2012 - 20:19 | Link to Comment chump666
chump666's picture

China fudge coming...

Can those pesky Chinese fudge men get that oil price down?

Wed, 08/08/2012 - 20:53 | Link to Comment pavman
pavman's picture

Gasoline has decoupled from the price of oil in the US, if you hadn't noticed... WTF chuck?!  Dam you obama and your anti-refinary bullshnitz!

Wed, 08/08/2012 - 23:05 | Link to Comment chump666
Wed, 08/08/2012 - 22:45 | Link to Comment chump666
chump666's picture

  All I can say is any net oil import nations, (which is basically more than half the world) that are already have out of control inflation despite their central bank lunatics and goverment idiots deniers, we got a war coming, or the beginnings of nasty geopolitical tensions.  Super power to super power. 

Look at your natural gas charts, see the divergence to oil...so does China and India.  So, while goverments keep their bullsh*t lower inflation targets and the Fed goes all in, you'll see nat gas producing areas in the world become hotpots.

This is what happens when psychos print money.

Wed, 08/08/2012 - 20:33 | Link to Comment Cognitive Dissonance
Cognitive Dissonance's picture

Them there is some ugly charts.

I see nothing, I hear nothing, I know nothing. Just wake me when they announce QE forever.

<What's that honey? Yes, I'm just kidding and yes, I picked up another six 24 packs of extra soft Charmin at Sam's Club on the way home.>

Wed, 08/08/2012 - 20:27 | Link to Comment DeFeralCat
DeFeralCat's picture

The recession has not even started yet. We have been sitting through the exploitave previews for the last four years. The movie start after the election.

Wed, 08/08/2012 - 20:55 | Link to Comment pavman
pavman's picture

Don't forget the torrent of baby boomer retirees coming the day after tomorrow.... now where'd I put my Social Security check?!

Wed, 08/08/2012 - 20:58 | Link to Comment Missiondweller
Missiondweller's picture

I think you mean the depression has not even started yet.

 

The recession seems pretty clear to me. And yes, a depression is coming.

Wed, 08/08/2012 - 20:33 | Link to Comment Dr. Engali
Dr. Engali's picture

The market can't price anything in when the fed is artificially pumping it. I wouldn't be surprised to find us in a deeper depression than we are currently in while the market is still in rally mode. If the fed would get out if the way this market would already have priced in the next leg down.

Wed, 08/08/2012 - 20:33 | Link to Comment economicminor
economicminor's picture

http://www.debtdeflation.com/blogs/2012/08/07/interview-with-fnn/

Try this for answers!

Steve understands as well as anyone and he explains it well.

Wed, 08/08/2012 - 20:33 | Link to Comment economicminor
economicminor's picture

http://www.debtdeflation.com/blogs/2012/08/07/interview-with-fnn/

Try this for answers!

Steve understands as well as anyone and he explains it well.

Wed, 08/08/2012 - 20:33 | Link to Comment scatterbrains
scatterbrains's picture

Maybe Bennie's next QE should be to buy a trill of inventory and sink it in the ocean...makes as much sense as any thing else they're doing.

Wed, 08/08/2012 - 20:40 | Link to Comment q99x2
q99x2's picture

Markets are now based on the fraud index not those silly old school statistics.

Wed, 08/08/2012 - 20:41 | Link to Comment yrad
yrad's picture

I've been trolling ZH for a few months now. Those charts and this article is fucking scary.

I'm going out now to add another $100 to my food storage.

Wed, 08/08/2012 - 20:46 | Link to Comment Bunga Bunga
Bunga Bunga's picture

Don't worry, Federal Reserve will take the appropriate measures.

Wed, 08/08/2012 - 20:56 | Link to Comment DeFeralCat
DeFeralCat's picture

Tyler: great stuff. I have been trying to find all day a superimposed chart of each countries dying industrial production but have not found one yet. It is going to be hard to reverse this train wreck.

Wed, 08/08/2012 - 21:04 | Link to Comment km4
km4's picture

College Debt Hits Well-Off

http://online.wsj.com/article/SB1000087239639044424690457757538257630387...

According to a Wall Street Journal analysis of recently released Federal Reserve data, households with annual incomes of $94,535 to $205,335 saw the biggest jump in the percentage with student-loan debt from 2007 to 2010, the latest figures available. That group also saw a sharp climb in the amount of debt owed on average.

Wed, 08/08/2012 - 22:14 | Link to Comment brettd
brettd's picture

Obama makes it easier for students to get into debt...

Never does he lower the cost of education.

Wed, 08/08/2012 - 21:06 | Link to Comment km4
km4's picture

Have Americans lost their taste for more and more stuff?

http://www.bbc.co.uk/news/world-us-canada-18992243

Americans might just be kicking the habit. Because while manufacturing is picking up and property sales and construction are both coming up off the floor, US retail spending remains distinctly shaky.

Spending fell in June, down 0.5% from May, and the spring numbers were the worst since the dark days of late 2008. The fall in sales is expected to hinder economic growth.

Wed, 08/08/2012 - 21:44 | Link to Comment Totentänzerlied
Totentänzerlied's picture

ZZZzzzz *yawn* - wake me when retail spending falls to 1912 levels, because that would mean 1 of 2 things: Sanity has prevailed at last and consumerism is dead and interred and eulogized and forgotten  -OR- the Ponziconomy has finally breathed its last and it's time to go to work for realsies. *Zzzz*

Wed, 08/08/2012 - 21:12 | Link to Comment wang (not verified)
Wed, 08/08/2012 - 21:46 | Link to Comment kornholio
kornholio's picture

bullish

Wed, 08/08/2012 - 21:53 | Link to Comment TahoeBilly2012
TahoeBilly2012's picture

I have just been shocked at buying food lately. I now mostly eat out for $10-$20 for healthy meals because it costs me as much to eat at home as a bachelor. I eat quality food. I think things are just about to go haywire, and that of course means war.

Wed, 08/08/2012 - 23:04 | Link to Comment yofish
yofish's picture

Son, if it costs you as a single to buy food that satisfies you for 30-60 (three squares) per day, I suggest you get help. It is unpossible to eat sixty dollars of store-bought food a day unless, of ourse, it's all Beluga.

Wed, 08/08/2012 - 23:42 | Link to Comment slewie the pi-rat
slewie the pi-rat's picture

rated #1 catfood by the AARP three years straight:

BelugaTM, BiCheZ!  "When money is no problem..."

Thu, 08/09/2012 - 00:02 | Link to Comment StychoKiller
StychoKiller's picture

Bachelor Chow™, coming to a grocer's near you!

Wed, 08/08/2012 - 22:01 | Link to Comment Jlmadyson
Jlmadyson's picture

Will be lucky to be barely above water this quarter. Don't be surprised by a negative print by Q4.

Wed, 08/08/2012 - 22:36 | Link to Comment Totentänzerlied
Totentänzerlied's picture

A GDP growth number below 2% is not just recessionary, it is contractionary, in this surreal world of permanent growth; 0% is depressionary all-out implosion. Look into your heart, you know it to be true.

Wed, 08/08/2012 - 23:02 | Link to Comment crzyhun
crzyhun's picture

This s/p is being kited by the NYFReserve. Period. As long as that happens Dave can stuff it. Even though he's 101% right. There is not  a thing Dearest Leader and his Klack will not do to get re-erected!

Thu, 08/09/2012 - 00:22 | Link to Comment ghenny
ghenny's picture

Sorry guys.  You just can't talk the market down.  Don't fight the tape its based on reasonably solid fundamentals.  The US may be a dirty shirt with a Bernanke dry clean but its the cleanest and safest shirt in the store.  People all over the world are going to keep feeding the US stock machine for awhile yet.  They have no other good choices.  Dow 14,000 - 15,000 over the next 12 months whether you or I like it or not.  Draghi may also be able to buy the Europeans enough time to get their house in order.  That will keep things humming along for awhile.  You can go broke listening to all these doom and gloomsters.  They may be right in the long run, but as Keynes said: "in the long run we're all dead".  So suck it up an get back into the market.

Thu, 08/09/2012 - 06:50 | Link to Comment michigan independant
michigan independant's picture

I have saved this moment. We shall see on your perch.

Dow 14,000 - 15,000 over the next 12 months whether you or I like it or not.

Wed, 08/08/2012 - 23:07 | Link to Comment dunce
dunce's picture

The words "death spiral" are often used to describe our economy. i have a Carter water saver toilet that is very unreliable and is designed to swirl in a whirlpool fashion. I have to stand and watch to make sure there is a complete flush. Every time i think as i watch my turds go around that if obama had a son he would look like them.

Wed, 08/08/2012 - 23:16 | Link to Comment analyzer_66
analyzer_66's picture

is it now time to restore Glass-Steagall and break up the big banks ??

Thu, 08/09/2012 - 00:04 | Link to Comment StychoKiller
StychoKiller's picture

Ain't gonna happen 'til AFTER the Great Implosion™!

Thu, 08/09/2012 - 01:57 | Link to Comment chump666
chump666's picture

*USD/AXJ firmer following weaker than exp Chin & India industrial output data
*Whilst moves in Asia tentative a bigger reaction is expected in offshore markets
*Commodities will come under pressure in London which will weigh on AUD et al
*Low end of China's economy not seen yet which will bring out the China bears

China trying to play both ends with the data. Sending this out end of Asian session for European/UK markets to whack the oil price down.

US markets will finally go into corrective payback.

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