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Supply Chain Slowdown Signals US Economic Slump Ahead

Tyler Durden's picture




 

The American Chemistry Council's chief economist Kevin Swift created a 'Chemical Activity Barometer' which tracks chemical production and prices, hours worked at producers, and manufacturing output among other factors. As indicated in today's Bloomberg Chart-of-the-Day, this indicator, based on its 'earliness in the supply chain' provides a signal that "the outlook for the economy is slowing during the next six to nine months" since 96% of manufactured goods are derived in part from materials produced by the US chemical industry. Three-month declines of 3% or more have preceded all but one recession since 1947 and it is currently down over 2.5% from its highs in March suggesting sub-par growth is coming.

 

 

Source: Bloomberg

 

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Tue, 06/26/2012 - 15:37 | 2562600 slaughterer
slaughterer's picture

See you in the NEW RECESSION soon.  

Tue, 06/26/2012 - 15:42 | 2562617 thad78
thad78's picture

But I haven't worn out my old recession yet!

Tue, 06/26/2012 - 15:56 | 2562665 Mark Carney
Mark Carney's picture

NEED MOAR BATH SALTZ

Tue, 06/26/2012 - 16:05 | 2562694 cougar_w
cougar_w's picture

Okay I musta missed this one.

Can someone pleez explain to me the origins of the "bath salts" meme? I'm lost.

Tue, 06/26/2012 - 16:07 | 2562701 Xibalba
Xibalba's picture

"Bath Salts" = "Risk ON"

Tue, 06/26/2012 - 16:37 | 2562797 Manthong
Manthong's picture

Bullish for pet food stocks now..

Man on K-2 eats K-9

Tue, 06/26/2012 - 16:06 | 2562703 dwdollar
dwdollar's picture

Please do tell where you've been living for the past month.

Tue, 06/26/2012 - 16:08 | 2562707 Conman
Conman's picture

maybe he was a face eating zombie for the past month. hint

Tue, 06/26/2012 - 16:12 | 2562718 dwdollar
dwdollar's picture

Ah damn... I thought that maybe, just maybe, there was an isolated part of society out there which wasn't de-evolving into cannibals.

Tue, 06/26/2012 - 16:20 | 2562751 AnonymousCitizen
AnonymousCitizen's picture

At BASF, we don't make recessions, we make recessions recessionier.

Tue, 06/26/2012 - 16:07 | 2562706 blunderdog
blunderdog's picture

Head shops have been selling bath-salts which are heavy-duty intoxicants (poisons?) and folks have been getting profoundly fucked up by snorting them.

Tue, 06/26/2012 - 17:31 | 2562962 TheFourthStooge-ing
TheFourthStooge-ing's picture

cougar_w asked:

Can someone pleez explain to me the origins of the "bath salts" meme? I'm lost.

Sure, no prob.

The "bath salts"/"plant food" label:

http://en.wikipedia.org/wiki/Designer_drug#Common_Names

Abstract: Novel drugs--novel branding
http://www.erowid.org/references/refs_view.php?ID=8455

Abstract: Synthetic Cathinones (Bath Salts): Legal Status and Patterns of Abuse (March)
http://www.erowid.org/references/refs_view.php?ID=8537

The chemicals:

MDPV (3,4-methylenedioxypyrovalerone)
http://www.erowid.org/chemicals/mdpv/
(includes links to more resources and media coverage)

Methylone (3,4-methylenedioxymethcathinone)
http://www.erowid.org/chemicals/methylone/
(includes links to more resources and media coverage)

Abstract: (MDPV): Chemistry, pharmacology and toxicology of a new designer drug of abuse marketed online
http://www.erowid.org/references/refs_view.php?ID=8450

Abstract: Synthetic cathinones: Chemistry, pharmacology and toxicology of a new class of designer drugs of abuse marketed as 'bath salts' or 'plant food'
http://www.erowid.org/references/refs_view.php?ID=8559

Abstract: The Toxicology of Bath Salts: A Review of Synthetic Cathinones
http://www.erowid.org/references/refs_view.php?ID=8477

The effects:

Abstract: Illicit bath salts: not for bathing
http://www.erowid.org/references/refs_view.php?ID=8517

Abstract: Recurrent Acute Kidney Injury Following Bath Salts Intoxication
http://www.erowid.org/references/refs_view.php?ID=8480

Abstract: Emergency department visits after use of a drug sold as 'bath salts'
http://www.erowid.org/references/refs_view.php?ID=8321

Abstract: Paranoid psychosis induced by consumption of methylenedioxypyrovalerone: two cases
http://www.erowid.org/references/refs_view.php?ID=8405

Abstract: Bath Salt' Ingestion Leading to Severe Intoxication Delirium: Two Cases and a Brief Review of the Emergence of Mephedrone Use
http://www.erowid.org/references/refs_view.php?ID=8493

Tue, 06/26/2012 - 17:34 | 2562970 Cursive
Cursive's picture

@cougar_w

The Florida cannibal who ate the homeless man's face off was reportedly high on bath salts.  Thus, the phrophecy has been fulfilled.  We WILL have zombie roving the planet and they will be high on bath salts.

Tue, 06/26/2012 - 16:08 | 2562708 azzhatter
azzhatter's picture

These recessions don't bother me a bit, I was a failure during the boom

Tue, 06/26/2012 - 15:38 | 2562605 Conman
Conman's picture

Maybe thingamagigs are being created at the Fed from thin air, much like fiat. That explains all, nothing to see here. move along.

Tue, 06/26/2012 - 15:38 | 2562607 Let The Wurlitz...
Let The Wurlitzer Play's picture

The FED needs to start buying chemicals NOW!

 

Tue, 06/26/2012 - 22:54 | 2563803 Zero Debt
Zero Debt's picture

Air-dropped from helicopters as usual, Sir?

Tue, 06/26/2012 - 15:39 | 2562611 caimen garou
caimen garou's picture

I did'nt think we left the old one

Tue, 06/26/2012 - 15:42 | 2562625 Tuco Benedicto ...
Tuco Benedicto Pacifico Juan Maria Ramirez's picture

The establishment media told us that the recession ended in June, 2009.  What!?  You don't believe the establishment media!?  Shame on you!  You are definitely a terrorist and an enemy of the state!

Tuco

Tue, 06/26/2012 - 15:39 | 2562612 Jason T
Jason T's picture

next down leg will take employment to population ration from 58.7% where it is in latest reading to 55.7%, which will shed another 10 million jobs.

good luck finding tax revenue there

Tue, 06/26/2012 - 15:41 | 2562615 slaughterer
slaughterer's picture

Tax revenue is for pussies.  

Tue, 06/26/2012 - 16:04 | 2562690 Poetic injustice
Poetic injustice's picture

I like pussies more than taxes, is that normal?

Tue, 06/26/2012 - 16:09 | 2562712 azzhatter
azzhatter's picture

liking pussy is good, liking pussies is a bit sketchy

Tue, 06/26/2012 - 15:42 | 2562618 RallyRoundTheFamily
RallyRoundTheFamily's picture

since 96% of manufactured goods are derived in part from materials produced by the US chemical industry.

Including the food.

Tue, 06/26/2012 - 16:10 | 2562715 azzhatter
azzhatter's picture

things are booming at my meth lab

Tue, 06/26/2012 - 16:25 | 2562763 SoCalBusted
SoCalBusted's picture

Do they report demand of Methylamine?

http://www.youtube.com/watch?v=SK3KhWC1ZFQ

 

Tue, 06/26/2012 - 17:28 | 2562952 Offthebeach
Offthebeach's picture

Meth use cuts down on food use, farm land use thus soil erosion and increases cop,court, child services jobs thus helping the economy, and medical care/ rehab service raises the GDP!
( Now with no teeth lisp).....Uf.. F.. A!, ....Uf ..F..A! Weref..Umba Won!

Tue, 06/26/2012 - 15:42 | 2562620 TonyCoitus
TonyCoitus's picture

Is "crack" considered a manufacured good?  If so, Detroit is booming!

Tue, 06/26/2012 - 15:42 | 2562622 lotusblue
lotusblue's picture

Great Posting Tyler!

This is fascinating indicator though I think in hyper wacko world we're in,reccession is already here! Just using up old inventory and very slow to reorder.

Just working hard to use best instrument to profit.

Tue, 06/26/2012 - 16:09 | 2562710 ParkAveFlasher
ParkAveFlasher's picture

I got an instrument for you, China bot, right here! 

Tue, 06/26/2012 - 16:02 | 2562623 Abraxas
Abraxas's picture

Slump? No! Who could have seen that coming?

Tue, 06/26/2012 - 15:43 | 2562626 Seize Mars
Seize Mars's picture

If the Fed wants to prop up chemical prices they had better put a major bid in Crude and Natty!

HA!!!!!!!!!!!!!!

Tue, 06/26/2012 - 15:45 | 2562634 JR
JR's picture

In my opinion, all economic decisions in this election year should take into account the possibility of war with Iran.

The implications of an extremely pro-Israel session at Romney’s retreat over the weekend is now being used as evidence that he may be even more pro-Israel on the ME than John McCain.

The closer Gov. Romney comes to being the Republican GOP candidate for president, the greater the criticism has become that he favors military action in the Middle East to support Israeli interests. For those hoping for a defeat of Obama in November, it’s important to remember that Obama edged out both Hillary Clinton and John McCain primarily because of the widespread of opposition to the Iraq War and Obama’s congressional vote against the war.

Ron Kampeas reports for JTA:The Global News Service of the Jewish People:

Romney to Jewish donors: ‘I get Israeli briefings’

By Ron Kampeas · June 24, 2012

Mitt Romney told donors attending his campaign's Utah retreat that he is briefed on the Middle East by Israeli government officials.

 

About 50 of the 700 donors who attended the retreat this weekend in Park City were Jewish, according to one in attendance.

 

..,Romney dropped in on the session, and said he had just been briefed by the Israeli ambassador, Michael Oren, speaking about, among other issues, the situation in Syria, the elections in Egypt and the effort to isolate Iran.

 

Romney, the former Massachusetts governor and the Republican presidential nominee, said he has such conversations with Israeli officials to be kept up to date on the region.

 

Such briefings are not an unusual once it becomes clear who the major party candidates are...

 

Addressing the U.S.-Israel session were William Kristol, a founder of the Emergency Committee for Israel which recently ran ads accusing Obama of not doing enough to stop Iran; Michael Chertoff, the Bush administration Homeland Security Secretary, who is Jewish; and Norm Coleman, the former U.S. senator from Minnesota, who is also Jewish.

 

To attend the retreat, donors either had to have donated $50,000 to the campaign or had to have raised $250,000.

http://www.jta.org/news/article/2012/06/24/3099041/romney-to-jewish-donors-i-get-israeli-briefings

Tue, 06/26/2012 - 15:51 | 2562648 roadhazard
roadhazard's picture

Speaking of Iran, Oromney may be too late for the party. 

 

It's probably not true because oil is not spiking and it's Debka.

http://www.debka.com/article/22133/British-forces-in-Syria-Assad-presidential-compound-said-under-attack

Tue, 06/26/2012 - 15:57 | 2562667 cougar_w
cougar_w's picture

Debka is only good for teh lulz

Tue, 06/26/2012 - 16:34 | 2562796 roadhazard
roadhazard's picture

When the hunt for Saddam was on they had him hiding everywhere but in a hole. They had Osama hiding in a container apartment on a tanker floating around the world.

 

Tue, 06/26/2012 - 16:18 | 2562741 JR
JR's picture

Could this be the British connection in a NYT’s story today that “Syrian Insurgents Strike a Nerve with Attack on Elite Damascus Guards”?

“The Syrian Observatory for Human Rights, an anti-Assad group in Britain with a contact network in Syria, reported that 10 people were killed in Qudssaya. The Local Cordination Committees, an anti-Assad group in Syria that has been documenting casualties in the conflict, reported 33 killed in the Damascus suburbs of Qudssaya, Al Hameh and Dummar, as well as two killed in the capital. The group also released a list of people it said were among 21 massacred by Syrian forces in Al Hameh.”

http://www.nytimes.com/2012/06/27/world/middleeast/free-syrian-army-attacks-elite-damascus-guards.html

Tue, 06/26/2012 - 19:33 | 2563273 Savyindallas
Savyindallas's picture

Ron Paul supporters and many indenpdents would never vote for another Neocon. Looks like gary Johnson will get the third party vote--doesn't matter-I think the powers that be are about to  throw Obama under the bus-so Romney won't need their votes.. He has been so discredited (except among retards) that another fresh face will have to come in. Matters not -they control both parties.

Tue, 06/26/2012 - 15:56 | 2562666 CosmicDebris
CosmicDebris's picture

Obama would do what he's told by big money, when he is told, just as Romney would. We're screwed either way.

Tue, 06/26/2012 - 15:57 | 2562668 Hype Alert
Hype Alert's picture

That's old school data.  The Bernanke Put fixes all.  Hah [/sarcasm]

Tue, 06/26/2012 - 16:03 | 2562687 Hype Alert
Hype Alert's picture

Speaking of the Bernanke Put, it looks like it takes a dip well below the 200 day before that gets called.  Tomorrow's durable goods numbers may get that started.

Tue, 06/26/2012 - 15:58 | 2562673 geewhiz190
geewhiz190's picture

great work

Tue, 06/26/2012 - 16:01 | 2562678 prodigious_idea
prodigious_idea's picture

With the Euro at $1.25-ish, what would it need to get down to in order to promote export sales to offset these figures?

Tue, 06/26/2012 - 16:01 | 2562681 Lore
Lore's picture

Ah. Another gauge to co-opt / compromise / suppress / manipulate. Go get 'em, my pretties!

Tue, 06/26/2012 - 16:03 | 2562688 joebren
joebren's picture

You can add the Architectural Billing Index to those indicators rolling over.

 

http://info.aia.org/aiarchitect/2012/0622/newsletter/ABI-may12.html

Tue, 06/26/2012 - 16:03 | 2562689 cougar_w
cougar_w's picture

Just going from the charts looks to me like chem is more of a trailing indicator than a leading one.

Tue, 06/26/2012 - 16:06 | 2562697 Conman
Conman's picture

Hard to tell but if you really did look the lines start to drop at the beginning of 08. PRE-recession. Again hard to say with this chart need better resolution and maybe some grid lines.

Tue, 06/26/2012 - 16:08 | 2562709 blunderdog
blunderdog's picture

Don't be such a square.

Tue, 06/26/2012 - 16:13 | 2562724 i8emallup
i8emallup's picture

Reading from left to right, CAB made the first move in 90-91, and clearly in 07-08. 99 looks like concurrent.  I wont dismiss this indicator. Thanks for sharing.

Tue, 06/26/2012 - 17:47 | 2563022 sessinpo
sessinpo's picture

I would look at two things. But a larger database with more historical reference in the chart would be helpful. Here are the two things.

1) Look at the spread and the scale. The times the spread reached the zero leverl or above and then declined seemed to work well.

2) The current peak on the upper chart of the Chemical Barometer and Industrial Production is lower than the previous peak. That may not bode well.

Tue, 06/26/2012 - 16:09 | 2562713 the not so migh...
the not so mighty maximiza's picture

This is summer of recovery III, how dare they

Tue, 06/26/2012 - 16:15 | 2562731 dwdollar
dwdollar's picture

Is it III or IV?

Tue, 06/26/2012 - 16:23 | 2562758 LawsofPhysics
LawsofPhysics's picture

Possesion is the law.  Just remember when goods and services stop crossing borders, troops will.

Tue, 06/26/2012 - 16:54 | 2562863 RoadKill
RoadKill's picture

Its even worse then the graph shows. Go look at the 1st divergence of IP and chemicals. That happened as US gas prices went from reflecting a waste product to reflecting a fuel source. As US gas prices skyrocketed we produced less chemicals per unit of IP as we used lower cost chemicals produced with cheap trapped gas abroad.

But since the great recession Nat Gas prices in the US have returned to favord status as a petrochemical feedstock. So the drop in chemichal activity really is forecasting a drop in IP and not vagaries in power demand and foriegn gas prices.

I dont know if Im doing a good job explaining the thesis, but basically between 1995 and 2005 you could have a severe drop in chemical activity and a less severe drop in IP because of all the chemicals we would use from offshore. But today the US chemical industry is the low cost source, and thus a drop in activity really will be 1:1 with IP.

Tue, 06/26/2012 - 19:56 | 2563309 Harrison
Harrison's picture

Oops, nevermind, figured it out.

Tue, 06/26/2012 - 18:34 | 2563144 I should be working
I should be working's picture

I don't understand how this is a forward looking indicator.

The thing has been in a downward trend for two years.

And I enjoy the curvy arrows, sure even a positive trend looks treacherous when you assume it's about to fall off a cliff...

Tue, 06/26/2012 - 19:47 | 2563299 Harrison
Harrison's picture

Well, so 3% drops precede recessions, but do recessions follow 3% drops? In other words, after every 3% drop in the index (or, per the article, all but one such drop), does a recession inevitably follow? Or were there over 9000 3% dips, followed by a few dozen recessions?

Tue, 06/26/2012 - 19:47 | 2563302 Harrison
Harrison's picture

BTW, I'm not trying to be snarky, this is a rather important distinction, and it's not at all clear from the article which one is the case.

Wed, 06/27/2012 - 04:18 | 2564275 Alejandrito
Alejandrito's picture

It is pretty sure US goes to reccession in second half.

http://leadenhallst.blogspot.com/2012/06/another-qe-or-twist.html

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