Wednesday, September 5, 2012

The Slow Economy is Getting Even Slower

New reports on the U.S. economy almost all suggest that things are going to remain quite weak for the foreseeable future. Manufacturing activity is pretty weak across the board.

Trade Group Offers Latest Sign of Faltering Factories has the latest:

"In the latest sign that U.S. factories could be churning out goods at a slower pace, a major manufacturing trade group lowered its forecasts for 2012 and 2013 industrial output. 

The Manufacturers Alliance for Productivity and Innovation said Wednesday that it expects manufacturing production to show just 4.5% growth in 2012 and a 2.3% gain in 2013. In May, the group forecast 5.2 % growth this year and a 3.3% increase next.

“While there is pent-up demand for replacing worn equipment — it is the uncertainty about the ‘fiscal cliff,’ declining business activity in Europe, and worries about a hard landing in China that are holding back longer-term commitments,” said MAPI Chief Economist Daniel Meckstroth.

The numbers are the latest troubling sign for the manufacturing sector. On Tuesday, the Institute for Supply Management said industrial production contracted in August for the first time since May 2009 as overall activity slowed for the third consecutive month. A Labor Department report Wednesday showed manufacturing productivity grew just 0.1% in the second quarter — the weakest gain since productivity declined a year earlier.

A slowdown at factories could be a troubling sign for Federal Reserve officials as they debate infusing another round of stimulus into the economy.

The manufacturing sector has been a steady jobs engine during much of the recovery, adding 233,000 jobs last year and 182,000 through July of this year.

MAPI sees job growth in the sector slowing from that pace. The group is expecting manufacturers to add 208,000 jobs in 2012 and 231,000 jobs in 2013. These figures are also well below the May forecast of 312,000 jobs in 2012 and 361,000 jobs in 2013."

Summing Up 

Things remain tough throughout the world and here in the U.S. as well.

When we get our act together, the rest of the world will follow.

But until we do, since we're 70% dependent on consumer spending, the rest of the world will struggle as our purchases stay weak.

It's like the analogy that when we catch a cold, the rest of the world gets pneumonia. And we definitely have a real bad cold right now.

Let's hope we get over our cold real soon, and that the private sector doctor is able to revive our "animal spirits."

Thanks. Bob.

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