Economic Data – 09/28/2012: Collapse Approaches


And I don’t say that lightly.  You can pay attention to the stock market all you like, but the REAL economy, the one that means something to YOU, is on the brink of collapse.  The following are reports that matter, measurements of goods and services and their respective prices at the ground level.


Chicago PMI (Purchasers Management Index): Here It Comes!

This presages a nasty official ISM next week… (ISM = Institute for Supply Management)

“The Chicago Purchasing Managers reported September’s Chicago Business Barometer fell to 49.7, its lowest level in three years…… Prices Paid showed the biggest gain in nearly two years.

This isn’t good folks and serves as confirmation of what I’ve been saying for a while on the leading indicators I watch — recession is baked in the cake and it’s too late to “fix it.”

The markets have not priced this in but they’re sure dumping on this today, with the DOW down triple digits and the SPX down 10 (so far.)

Employment in the survey is at a 2-1/2 year low, new orders, backlogs and supplier deliveries have their 3-month moving averages at the lowest levels since mid-2009.

Remember that mid-2009 was the alleged floor, which means we’re now at levels that are at the worst they were before we allegedly turned the corner.

Production in the report remained positive, but new orders is not, backlogs turned last month below 50 and remained there this month, inventories are flat, employment is just barely positive (and for Chicago this is terrible — that economy is typically VERY resiliant) and prices paid ramped, reflecting commodity price increases.

How can this be?  It’s simple, really — you were lied to.  Repeatedly.  Intentionally.  For the explicit purpose of goading you into overspending and borrowing (again) so that the banksters and politicans would not have to face the truth.

They failed, because arithmetic doesn’t care about politics.

It just is.

We blew it folks.  We, the people blew it.

We have serially refused to hold our politicians to account.  We have refused to insist on jailing the banksters and putting a stop to the scams, from HFT on down the line.  We are cheering for the Party of Frauds on both sides of the aisle instead of demanding that someone, anyone, step forward with the truth.  We think it’s all ok when the number of people on food stamps reaches an all-time high and a sudden ramp in “disabled” people is acceptable (who weren’t disabled just a few years ago when jobs were easier to come by.)

The bill is on the table for our idiocy, especially our fiscal and monetary policy idiocy, and the waiter is tapping his foot.

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Personal Income And Spending: What’s That Smell?


Personal income increased $15.0 billion, or 0.1 percent, and disposable personal income (DPI) increased $12.5 billion, or 0.1 percent, in August, according to the Bureau of Economic Analysis. Personal consumption expenditures (PCE) increased $57.2 billion, or 0.5 percent.  In July, personal income increased $18.5 billion, or 0.1 percent, DPI increased $15.4 billion, or 0.1 percent, and PCE increased $45.4 billion, or 0.4 percent, based on revised estimates.

Real disposable income decreased 0.3 percent in August, in contrast to an increase of 0.1 percent in July.  Real PCE increased 0.1 percent, compared with an increase of 0.4 percent.


But, is this a surprise?

See that nasty downturn on the right side of the chart?  That’s what you’re seeing above; that’s about a 3.5% annualized decrease, which is exactly what the above shows.

The reason you didn’t see that chart track during the 2000s is that during that time period we goaded people into borrowing against their home in ever-large increments.  But now we’re out of people who can (and will) add more debt leverage on the consumer side and government deficit spending cannot substitute for this as all such spending is simply an immediate tax that is funded through purchasing power depreciation.

And just as in the 2000s the personal “savings” rate (income less outlays, which means that paying down debt counts as “saving”) has dropped under 4%.  Capital formation continues to be destroyed.

We’re in big trouble folks…..

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