Here Comes The Double Dip Pt. 4 (merged) Archived

[Daniel_Plainview]

China manufacturing contracts for eighth month
Chinese manufacturing activity hit a seven-month low in June, data from HSBC showed on Thursday, putting pressure on Beijing to do more to boost the world's second largest economy.

The banking giant said preliminary figures from its closely-watched purchasing managers' index (PMI), which gauges the manufacturing sector, fell to 48.1 in June from 48.4 in May on shrinking exports and weak domestic demand. The June figure also marked the eighth consecutive month that manufacturing has contracted. A PMI reading above 50 indicates expansion, while a reading below 50 points to contraction.

Analysts said the results suggest China will move again to boost its slowing economy, after cutting interest rates earlier this month and encouraging more government investment. "China's manufacturing sector continued to slow in June," HSBC's co-head of Asian economic research, Qu Hongbin, said in the statement. "With external headwinds remaining strong, exports are likely to decelerate in the coming months."

New export orders, a component of PMI, recorded their sharpest decline since March 2009, HSBC said, but did not give a figure. The bank will release the final data for June next month.

China's commerce minister said earlier this month that the country faces a "severe" trade situation this year, as weak demand in key exports markets such as the United States and Europe hit the economy. ... In a further worry for the economy, weaker prices and a contraction in new orders suggested domestic demand is also flagging, Mr Qu said.

... China's economy grew an annual 8.1 percent in the first quarter of 2012 - its slowest pace in nearly three years. ... The government has reduced its economic growth target for this year to just 7.5 percent, down from growth of 9.2 percent for all of last year and 10.4 percent in 2010. ...

[Daniel_Plainview]

Germany falters as eurozone slowdown deepens
The downturn in the eurozone's private sector is becoming entrenched, business surveys showed on Thursday, as falling new orders and employment levels dent confidence.

June is the fifth consecutive month activity across the 17-nation bloc has declined, dragging down heavyweights Germany and France and increasing pressure for the European Central Bank to take action to support the economy. Markit's Eurozone Composite Purchasing Managers' Index, a combination of the services and manufacturing sectors and seen as a guide to growth, held steady at 46 this month, the lowest since June 2009 when the bloc was mired in a deep recession. ... "It is a worryingly steep downturn we are seeing and it is spreading from the periphery, which has been falling at an increased rate, through to Germany. It is becoming deeper and more broad-based," said Chris Williamson, chief economist at Markit.

The data pointed towards a second quarter contraction of around 0.6 percent, Markit said. ... With uncertainty reigning, optimism among survey participants dwindled to its lowest level since March 2009. The business expectations index for services firms slumped to 50.8 from May's 57.4, the biggest one month drop since the aftermath of the Lehman Brothers collapse in late 2008.

"Companies are getting increasingly rattled by the crisis that is engulfing the region, and there are clear knock-on effects for the real economy," Williamson said. Manufacturing sector [] activity declined for the 11th straight month. Its 44.8 reading was the lowest since June 2009 and missed the 44.9 forecast. The output index for the sector fell to 44.4 from 44.6, the lowest since May 2009. Data from Germany, Europe's largest economy, showed its manufacturing sector contracted at its fastest pace since June 2009.

And things are unlikely to improve anytime soon as composite new business declined for the 11th month, with the index coming in at 45.2, just up from May's 44.6. The survey also showed that firms have been running down old orders for a year.

To reduce costs, and giving an indication of their prospects, factories reduced headcount for the fifth month, with the employment sub-index falling to 46.5 from 47.1, its lowest since January 2010.

"It's a sign that companies are expecting things to get worse and not better," Williamson said. ...

Data from Germany, Europe's largest economy, showed its manufacturing sector contracted at its fastest pace since June 2009.

[KingM]

After four years of screaming about a recession, you may finally get it.

[dolanbaker]

Jayzus DP, your doom filter must be smoking!

[Armageddon]

After four years of screaming about a recession, you may finally get it.

Thanks to the 15+ trillion of Fed intervention

[Lore]

After a loss of 40% in real assets, it's obvious that the average citizen never came out of the Great Recession.

[Daniel_Plainview]

Philly Fed Craters, Approaching 2008 Abyss

The survey’s broadest measure of manufacturing conditions, the diffusion index of current activity, fell from a reading of -5.8 in May to -16.6, its second consecutive negative reading (see Chart).



Nearly 40 percent of the firms reported declines in activity this month, exceeding the 22 percent that reported increases in activity. Indexes for new orders and shipments also showed notable declines, falling 18 and 20 points, respectively. Indexes for current unfilled orders and delivery times both registered negative readings again this month, suggesting lower levels of unfilled orders and faster deliveries. ...



The June Business Outlook Survey suggests that firms in the region’s manufacturing sector are experiencing declines in overall activity this month. Firms reported a notable falloff in new orders and shipments. ...

[TheAntiDoomer]

Leading economic indicators rise 0.3% in May
http://www.marketwatch.com/story/leadin ... atest_news

The risk of a downturn in the second half of this year is relatively low, the Conference Board said Thursday as it reported that its index of leading economic indicators rose 0.3% in May. "Economic data in general reflect a U.S. economy that is growing modestly.

[Daniel_Plainview]

Could a deflationary depression be in the wings?

Exports to Europe Implode:

Following consecutive monthly gains, Exports to Europe dropped a massive $4.0 billion in April, the largest monthly decline dating back to January 2005, including a $2.8 billion drop to the EU alone. In particular, Exports to Germany declined $0.4 billion in April and are now only up about 0.2% over the past year. Overall, Exports to Europe are now down 2.7% from April 2011, the first yearly decline since February 2010. The recent slowdown of Exports to Europe supports the FOMC assessment that sluggish economic growth in Europe is likely to affect trade with the US. ... The easing of export growth does not bode well for US economy.

Crude (WTI) Dips Below $80/bbl:

With West Texas Intermediate crude oil trading with an $80 handle, near two year lows, while stocks remain within a few percent of their four-year highs, one has to question just what it is that stocks believe about our bright new future of growth and demand that the all-important energy markets do not. Between Europe's recession, last night's dismal China PMI, and a significantly trending rise in US unemployment claims, it seems more likely that the global demand picture painted by the oil market is a better reflection of reality than the earnings/multiple picture painted by the nominal price of US equities. We know that bad is good when it comes to the front-running of Bernanke's print button but wouldn't bad being good raise the USD-nominal price of oil also?

[Daniel_Plainview]

The German Economy Has Cracked

A significant economic event has taken place in Europe today... All through the crisis, the German economy has been stunningly resilient, despite the fact that all of its natural export markets were collapsing. The miracle run is coming to an end.

The big sub-headline from the report is this:

Steepest drop in German private sector output for three years. Euro crisis leads to survey-record monthly fall in service providers’ business outlook.

I wouldn't worry too much. Just because the foundation cracks doesn't mean the rest of the Eurozone will be affected.

[Plantagenet]

After four years of screaming about a recession, you may finally get it.

The double-dip recession in Europe has been going on for over a year.

The US economy is now slowing as well. China and India are slowing too, and DP just reported that Germany is just now starting to slow.

For the last four years the global economy has struggled to recover from the 2008 recession...and it couldn't do it.

Face facts: ---we are in a global economic depression. The global economy can't cope with high energy prices caused by peak oil. The global economy can't grow when oil goes over $100/barrel.

---Daniel Plainview is right----the economy is in the crapper

[AgentR11]

Could a deflationary depression be in the wings?

Not a chance in *****.

They'd go out in Time's Square and pour a multi-trillion dollar pile of cash money on the ground before they allow deflation. Don't forget the CPI is current cooked to show lower than experienced inflation, a tweak here or there, should be more than sufficient to keep the CPI positive.

Deflation is annihilation. Its not survivable. If Bernanke is really a closet apocalyptic doomwisher, he might allow it; but nothing in his actions supports the notion that he'd prefer the tribal, post-industrial, road warrior fantasy.

CPI tweaking is likely plenty to keep deflation off the table.

[Daniel_Plainview]

Could a deflationary depression be in the wings?

Not a chance in *****.

They'd go out in Time's Square and pour a multi-trillion dollar pile of cash money on the ground before they allow deflation.

I disagree. You're assuming that Ben Bernanke (aka Heli-Ben aka Banana Ben) will stop at NOTHING to avoid a deflationary depression. However, even Ben has a modicum of intelligence and rationality. Moreover, just because a person is insane and irrational doesn't mean that external, outside forces cease to impose reality upon him/her.

At some point, QE/printing will backfire ... and Ben knows this. Perhaps that's why he has not yet implemented QE3 (even though Antidoomer emails him daily pleading for QE^N).

Don't forget the CPI is current cooked to show lower than experienced inflation, a tweak here or there, should be more than sufficient to keep the CPI positive. ... CPI tweaking is likely plenty to keep deflation off the table.

CPI tweaking is a separate issue.

Deflation is annihilation. Its not survivable. If Bernanke is really a closet apocalyptic doomwisher, he might allow it; but nothing in his actions supports the notion that he'd prefer the tribal, post-industrial, road warrior fantasy.

[this is an extremely important issue that would take a person several hours to address]

[basically, my argument boils down to "Ben cannot dictate immutable economic forces beyond his control" ... if a deflationary depression is absolutely dictated by the external economic circumstances, then there's nothing that a RATIONAL Ben can do to prevent it]

I believe that a deflationary depression is absolutely guaranteed ... and that there's no sane, rational strategy to prevent it over the long-term. There's no doubt that an abundance of irrational, insane remedies exist to counter this over the short-term (such as currency suicide; Zimbabwe-mania; etc.) ... but over the long-term, the laws of physics always prevail: "for every action, there is an equal but opposite reaction."

[AgentR11]

The laws of physics would apply if the value of the dollar was a fixed thing.

However, that assumption is false. The value of a dollar is completely arbitrary. You could easily express an economy half our current size, with ten times the nominal dollar value. I don't think anything so extreme will be necessary, but I state it to prove a simple point, there will be no deflation. There may be (I think quite likely) a significant contraction in the real output of the economy, but it will be expressed in an ever increasing dollar number.

In point, my opinion, is that this isn't a future likelihood, but is happening NOW. The economy is contracting, and the dollar is being manipulated such that the slightly smaller economy (per capita) is being expressed in slightly increasing current dollar valuation; and that this is the most rational, and only realistic approach to resource limits impinging upon economic activity.

[OilFinder2]

People say things that they don't mean. Outwardly, you claim that QE is bad; but internally you utterly relish and crave its short-term adrenalin rush and illusory outcomes ... like every other Corny and bull-market junkie.

This could very well be the most hypocritical statement in the history of mankind.

We have post after post after post after post after post after post after post after post after post after post after post after post after post after ... of DP reveling in the effects of Bernanke's QE and money-printing as it drove up the price of his shiny yellow metal, posts complete with multiple proclamations of, "Thank you Heli-Ben" or "Thank you Ben." Little wonder he keeps predicting another round of QE, because he obviously wants another round so as to drive up the price of his favorite shiny metals, despite his frequent claims of its ill effects. What a complete and total hypocrite!

[Daniel_Plainview]

The value of a dollar is completely arbitrary.

Incorrect.

While the nominal value of the dollar is completely arbitrary, the real value of the dollar, over the long-term, depends upon economic fundamentals, and is therefore not arbitrary.

Oh wait, I just received an email from Robert Mugabe, and I need to rethink my thesis ...

[AgentR11]

The value of a dollar is completely arbitrary.

the real value of the dollar, over the long-term, depends upon economic fundamentals, and is therefore not arbitrary.

The quantity of dollars is not limited by external factors.
Thus, the quantity of dollars is arbitrarily set by those in charge of the money supply.
The real value of each of those dollars is dependent, basically, upon the value of "the stuff" divided by the quantity of currency.

x / arbitrary = arbitrary.
qed

One might disapprove of Mr. Mugabe, but you best take head. Your precious dollar will never be worth more than the controllers of the currency want it to be worth.

[dsula]

x / arbitrary = arbitrary.

Hmm. If we solve for 'arbitrary' we get arbitrary = sqrt(x).
How does that make any sense?
Just having some fun.

[ralfy]

After four years of screaming about a recession, you may finally get it.

No, it won't take place because of screaming.

[Daniel_Plainview]

German confidence nosedives amid Euro crisis 'domino effect'

German companies are becoming more worried about the eurozone debt crisis, Ifo economist Klaus Wohlrabe said on Friday after data showed business sentiment declined in June for a second month running to its lowest level in over two years. "The euro crisis is really hitting home," he told Reuters. "It's right on the front doorstep." He said the data showed companies were adopting a wait-and-see attitude and were holding back on investments. "Until now Germany was really doing quite well, if you ignore the small dip in the winter," Mr Wohlrabe said.

Germany's economy contracted by 0.2 percent in the fourth quarter of 2011 before growing by 0.5 percent in the first quarter of 2012. But Mr Wohlrabe said the situation in Germany was changing for the worse and added that the economy's growth dynamic would weaken further....