After a steep decline, then negative revisions, Industrial Production is about where it was in June. This action makes for interesting charts.
The headlines are amusing.
It’s easy to spin this however you want.
Industrial Production Percent Change Month-Over-Month
Industrial Production Index Since 1972
The manufacturing index peaked at 106.44 in December of 2007.
Recession watchers please note the Great Recession started one month after the peak. Manufacturing is still 5.9 percent below that high.
Industrial Production Index Since 2022
Manufacturing this cycle peaked at 101.02 in October of 2022.
Industrial Production and Manufacturing Production Percent Change Year-Over-Year
Manufacturing durable goods are durable goods used in manufacturing, not consumer durable goods like appliances.
Hurricane Beryl
Some of the decline-rebound is due to hurricane Beryl smashed into Houston. But can that realistically account for motor vehicles?
Motor vehicles have added to the volatility of retail sales as well.
For discussion, please see Retail Sales Rise a Feeble 0.1 Percent, Yet Generally Better than Expected
Note that Motor vehicles sales are counted when the manufacturers ship cars to the dealer, not when a consumer purchases them.
High energy prices and or energy scarcity reduces the value of unskilled labor. The economy is humming along at a good clip but the unskilled labor standard of living is in a rapid collapse. STEM skills are in high demand are well compensated and prosperous.
Businesses that hire unskilled labor are closing because the cost of unskilled labor is higher than the value produced. Restaurant waiters, cash register clerks, shelf stockers, paper shufflers, assembly workers are out on the street or find they cannot make ends meet at the grocery store. Hyper inflation hastens the declining value of their paychecks.
Your first sentence is backwards.
“ High energy prices and or energy scarcity reduces the value of unskilled labor.”
Since energy can replace manpower, cheaper energy replaces more manpower.
And energy is cheap, not expensive. One 42 gallon barrel of oil equates to 25,000 hours of physical labor. And that barrel is around $70 right now.
That 2024 could be a year of no significance does not compute given that what’s being touted as the most important election in American history is 2024’s landmark event, but in the focus of the longer lens of history, it may not matter as much as we expect.
If the election wasn’t enough, the all-time stock market highs are the cherries on top.
The issue here isn’t the people or the politics or the policies; it’s the system itself reaching its limits, having exhausted all potential for the scale of change needed to stave off collapse.
In other words, it no longer matters who’s nominally in charge, or the policies being put in place: the system has lost the capacity to adapt radically enough to surmount the novel challenges it now faces.
https://charleshughsmith.substack.com/p/2024-a-year-of-no-significance
If HK is this bad… what’s the mainland looking like… https://archive.md/KjlzD
Expect more job cuts even during times of growth and profits.
AI will shrink workforces within five years, say company execs
https://www.cnn.com/2024/04/05/business/ai-job-losses/index.html
Real growth since around 2005 for industrial production has been nearly 0%.
That’s because of sending production to China and northern Mexico. Think about all those GM and Ford vehicles like the Ford Maverick light truck being built not in the USA but Mexico.
The last TV made in USA was in 1993 at the Zenith plant in Missouri.
And consider how much of the remaining USA manufacturing has been automated and streamlined, with less workers. That’s mainly why it has been 0%.
At least the +$7000 Apple Mac Pro is made in the USA.
And the Honda CRV (an affordable care) is made in Indiana.
– Think about all those GM and Ford vehicles like the Ford Maverick light truck being built not in the USA but Mexico, AND the Honda CRV (an affordable car) is made in Indiana ETC.
– The last TV made in USA was in 1993 at the Zenith plant in Missouri.
> Now I really am thinking about those hundreds of thousands of Vehicles, AND those hundreds of thousand Electronic Products like TV’s, Computers, AND Pagers NOW!
Things that make you go Hmm…
Agreed. But lowering interest rates is not going to have any effect on this trend other than to make financing robots cheaper.
Still no signs of a real recession. I see restaurants packed on weekends in my area. People eating out for lunch during the weekdays. Lots of car traffic everywhere. I barely see the need for even a quarter point cut.
If there’s enough money sloshing around for people to still want to gladly pay $60k for intangible digital tokens (aka a bags of air), then we don’t need no stinking rate cuts lol.
Yep. Actually what we need are rate cuts but removing money out of the money supply via confiscation of laundered money and assets This will automatically increase the housing supply and reduce inflation quickly.
keep the trillion flowing every 100 days…. this is … a f789ing perpetual growth machine!!!!!
Question for you. What’s your opinion on Permian production after the Matterhorn gas pipeline ramps up over the next few weeks?
Permian Nat gas prices have been negative most of this year so far as there wasn’t enough pipeline capacity to take the gas away.
This has forced Permian companies to sell gas at a loss and defer new drilling until the situation improved.
Matterhorn should alleviate this bottleneck and allow companies to expand drilling again. The question is: will they? Will Permian oil production increase as a result, or will companies remain disciplined?
The Precarious State of the Shale Oil Industry:
Try to get your head around the idea that by 2027, US tight oil production might be 12 MM BOPD, not the 9 MM it is now, which is what cheerleaders say it will be, and that means we’ll actually have to find and extract 12 MM BOPD… before we can ever grow the new 3 MM. Man, that is a slew of new wells! Thats gonna take like…four times the HZ wells we’ve already drilled in the US.
Where?
Read More
I didn’t ask you for an old article from Mike Shellman from back in March. I already read everything he writes.
I asked for your opinion on the impact of the Matterhorn pipeline. Don’t you have an opinion? Or is that all you do; reference old articles.
Based on what I have read from people like Mike, Art Berman and Tim Morgan — all very experienced oil and gas men… shale is about to peak — and production will collapse quickly once it peaks.
World crude oil extraction reached an all-time high of 84.6 million barrels per day in late 2018, and production hasn’t been able to regain that level since then.
https://ourfiniteworld.com/2024/09/11/crude-oil-extraction-may-be-well-past-peak/
I follow or have read them all. But I don’t limit it to just those three people with similar opinions. I follow or read many more. Everyone realizes that US shale production will peak “eventually”, but you seem to interpret that as “today”. There is a wide variety of opinions on when the peak will occur, with some thinking as late as 2030.
After the peak occurs, there are also many opinions on how quickly it will decline. Many expect a decline of a few hundred thousand barrels pd per year. You seem to expect it to drop to zero very quickly.
I am in the camp of “peak in the next few years” and “decline slowly over the next decade”. Not peak today and gone tomorrow as you keep implying.
Still, this means that US shale producers have relatively short reserve lives (5-15 years). In comparison, many Canadian producers have 10-20 years of shale reserves and Canadian oil sands producers have 30-70 years of reserves.
Which is why I am more heavily invested in many Canadian shale and oil sands producers. Both of which have lower breakeven costs than US producers.
Now; how about giving me your opinion on whether the Matterhorn pipeline will result in increased Permian production in the next few months. Or do you have to wait a few months for another article on oilystuff?
My local recession indicator is the number of tree cutting dump trucks at my local gas station each morning. There’s still 4-5 of them topping off their tanks EVERY MORNING.
No recession here in NW Atlanta.
JPowell is about to hand inflation a 2nd go.
No worries. THIS time it WILL be transitory! [lol]
– Still no signs of a real recession. > That’s because it’s been Papered Over with Printed Money. It’s here and it’s massive! Signs are everywhere you look, read, analyze etc.
– I see restaurants packed on weekends in my area. People eating out for lunch during the weekdays. > Not sure where you live, but most places in America now are Closing Restaurants, and having Layoffs, and elsewhere as well. Heck I was at lunch outside, in our major City in my area, recently and we had a total of 7 people at the height of lunch, on a beautiful sunny day! Place was completely Empty Inside! We had Pizza, others did as well. Not staying open selling a couple pizzas at the height of lunch on a great day!
– Lots of car traffic everywhere. > Those are people going to work, coming home from work, going to there next job of work, Looking for work, etc.
– I barely see the need for even a quarter point cut. > That I agree with, because we are in a recession and printed way too much money, so inflation is through the roof and getting worse by the day. The Government NEEDS $$$!!!! Print, print, print is there only answer, if they even remotely are looking for re-election!
And the politically driven fed is about to lower interest rates.
Mish, can we trust ANY numbers if they are simply SURVEY DATA? SAMPLING, FUDGING, GUESSING, and then LYING.
It might be just Me, but I have a really hard time trusting and/or believing any numbers from this Administration. They Misrepresent the numbers constantly, and then Revise them constantly. It’s all a show with the numbers, to make things look a certain way, at certain times. They have massive Agendas that require Mountains of Money we simply don’t have. So instead of changing direction, they simply Print More Money!
My thought, is that they manipulate them in a direction to support whatever current Agenda is being pushed. For example, for Ukraine we had to help with the Agenda of War, but we don’t have that sort of Money, so We Print That! With Haitians we have the Agenda of “Open Borders” so we are not giving them money per se (YET), so no need to print for them. We are using are Countries Citizens Resources FOR THEM! You know, like Hospitals, Schools, etc. We don’t need all that stupid stuff for American Citizens right?
You know, things like that are going on…
Wow, industrial production flat as a pancake since 2005. Why is this chart not more “widespread”? It certainly helps to explain why it takes an ever-growing amount of money printing and debt to keep “the economy growing”. Asset flipping/transaction facilitating and healthcare jobs may be common ways for lots of Americans to make good money these bubbly days, but they are NOT ways to add real prosperity to a nation. In fact, I would argue that in cold, analytical sense, the act of keeping old people healthy is actually counterproductive to growing an economy. Unless you’re building, growing or mining something, then you’re not really making the country more wealthy in my view.
Manufacturing’s share of “nominal” GDP peaked in 1953 at 28%. By 2015, it had declined to 12%. Today it is 11.3%.
However, when adjusted for inflation, manufacturing’s share of “real” GDP has declined from 13% in 1953 to 12% in 2015. This is a result of general inflation being higher than manufacturing inflation over that 70 year timeframe.
https://www.stlouisfed.org/on-the-economy/2017/april/us-manufacturing-really-declining
Manufacturing is not a large part of our economy.
Well no, because it’s been substituted by “consumption” and “services” (not to mention government “work” and healthcare…as if that’s a net positive). Call me old fashioned but I don’t think that’s a good trend long term, if real prosperity is what we want.
There is nothing wrong with wanting more manufacturing. Just be aware that it represents a shrinking portion of world GDP. In other words, it’s not where the most future growth will come from.
China ranks #1 in world manufacturing. It represents 27% of their economy and makes up 20% of world manufacturing.
The US is #2 in world manufacturing. It represents 11% of our economy, and makes up 18% of world manufacturing.
Right now, we are losing to China is the areas where growth still exists in manufacturing. They now dominate in Wind, Solar, EVs, PHEVs, steel, rare earth metals and high tech. They have many advantages over us including modern infrastructure, integrated internal supply chains, and a huge amount of available renewable energy. Their wages are almost equal to ours in the manufacturing sector.
It is fine to suggest we manufacture more. The question becomes: How do you propose to make our manufacturing competitive again?
Well if our Unions keep asking and expecting way, way more money than they are worth, with benefits beyond what a non-Union workers typically get. Then our Unions will get disbanded slowly at first (like now) and then all at once.
Not to mention, the huge bonus of getting the Government out of our workers pockets, and directions etc. let the “Free Markets” set pay at its real value, and stop the Government from selecting who gets what, when and how much…
What do you want to manufacture? What physical items are you short of?
How many cars and motorcycles can you fit in your garage? How many cell phones do you need? There’s a limit to stuff per person.
Not me personally, I mean things that the rest of the world may want form us. I am just of the belief that if you’re not building, growing or mining things then you are not actually growing a prosperous nation, you are generating “fake” prosperity and that could come back to bite us someday. The US, via the petrodollar and the eurodollar system has been able to fake it for a stupendous amount of time, and probably will be able to for another decade or two (thanks to horrible demographic trends on the part of our main rivals), but I still don’t like the idea that our economy is fake and based in large part on printed dollars versus other economies which are more real. Call me old fashioned.
But we are already producing 18% of the manufactured goods in the world with just 4.2% of the world’s population. How does that make our economy fake?
China produces 20% of manufactured goods with 18% of the population.
Your entire premise is nonsensical. You seem to think we produce almost nothing. But we produce a lot.
rates need to RISE given massive devaluation of fiat $dollar
Just what the FED ordered: an excuse to keep rates unchanged.
your blog shrunk . miniaturization
2 trillion deficit a year and wars in Ukraine and ME, you can expect this.
Exactly, where do you go for the finest, most expensive bombs and missiles? America of course!
Yep. All these numbers are just “best guesses” subject to revision. Mish does his best to present the data and some analysis, but it is a difficult job.
As I always say, take them for what they are. Know that they will never be accurate and will always be revised. And by the time they are revised to be a little more accurate, the data is sometimes too old to be useful.
Better to look at the long term trends by following a year’s worth of numbers to see where we are headed.
As far as I can see, we are still plodding along with slow growth. The Fed will be cutting rates over the next year or two, probably a quarter point at a time (with the occasional half point cut). I expect a quarter point cut tomorrow, not that it matters much to me personally.
“It’s easy to spin this however you want.”
Then that’s a HUGE problem for Trump. he needs to make the case that things are getting worse and he’s a better option but who is going to see that with the stock market roaring, inflation coming down, and an economy that keeps chugging along.
Throw in a fed cut that will juice things up nicely and trump is done unless we get an October surprise.
The strange thing this election cycle is I haven’t seen any trump or harris political signs anywhere in my neighborhood or even driving around. Nor do I see vehicles with bumper stickers or flags showcasing candidate of choice. Only 48 days away from the big day.
Funny you mentioning the signs. In 2016 and 2020 Trump signs were everywhere you looked in my neighborhood and really you could see them or his flags in tons of places all around West Palm (including people flying banners from overpasses on the highway). Its one of the reasons I felt Trump was going to win in 2016 because no one had a Hillary sign.
This year there are far fewer signs. I’d say maybe 1/3 of what I saw in 2016 and 2020 and very few cars flying flags or people waving banners on overpasses on the highway etc. Yet those that I do see are almost entirely Trump (probably on the order of 5 to 1 or greater). Either everyone is fed up / exhausted with the election cycle and everything that surrounds it or everyone has become afraid to let anyone else know their choice lest they be called out for it.
If it’s exhaustion, that may favor Trump because his supporters will come out but on the Democrat side it may be another case of no one enthused to come out for Kamala the same way they weren’t enthused for Hillary.
Except you’re in Florida which is boomer country but it’s very telling none the less.
People are getting exhausted and BORED with Politicians and their lies….broken Promises…no RULE OF LAW on Lobbying….we are CORPORATE-DRIVEN anyway, right?
I don’t see much in the way of national political signage either. On NextDoor, someone complained that their car was keyed after they sported a Harris/Walz sticker.
Here’s the bumper sticker I am looking for:
WORRIED ABOUT YOUR CAT BEING EATEN BY ‘HAITIENS’?
……………. ***VOTE TRUMP!***
Trump supporters can get along with Harris-supporting neighbors. The reverse is not true, at least in blue strongholds like here in Minneapolis. I would literally fear having my house firebombed if I put a Trump sign in my yard.
Egads, what next!?
He doesn’t need to make a case anymore. Talk to any random person on the street, and unless they have TDS, they’ll easily volunteer that things felt better under Trump. Just because the war machine is sitting pretty and pumping out profitable hardware doesn’t mean John Q public feels it.
TRUE
Trump’s not doing much of anything except getting further and further behind.
https://projects.fivethirtyeight.com/2024-election-forecast/
Heck even Ted Cruz is running for his life in Texas. Looks like a blue wave is building with only 48 days away.
538 has zero credibility after 2016 and 2020. They gave Biden an 89% chance of winning and he only squeaked by thanks to 4 counties. They thought Hillary would trounce him too…oops. Trump is neck and neck in the popular vote, and for a republican that is basically the same thing as a near or total sweep of the swing states.
https://www.realclearpolling.com/maps/president/2024/no-toss-up/electoral-college
I don’t know what streets of losers you are walking on!
Trump would be better off if the economy indisputably sucked, but don’t underestimate the potency of the cat-eating issue.
For Harris, yes?
You are right!
Another load of ammunition for moving to 3 month averaging of government statistics. It’s impossible to make valid economic projections when the data is incorrect and subject to major revision
By your argument, if you want to measure the blood pressure of a patient, you’d average readings over 3 days. In fact, a case could be made that the delay and timing of economic series is part of the problem.
Data ‘smoothing’ has uses, though. For intervention analysis, interventional autoregressive integrated moving average (ARIMA) models,.difference-in-differences (DID) (seasonal differencing to remove seasonal effects, for example), and segmented regression of interrupted time series (ITS), are regularly used.
More complicated, and accurate, are extraction of long term trends and ‘business’ cycles (smoothed by least-squares polynomial splines). The difference between the smoothed data and actual data reveals random variation and interventions. You’d be surprised what can be identified from a data series. The advantage, you have (theoretically) identified when change occurs. And yes, it can be applied to all kinds of data
As to whether MA gives more reliable forecasts, good luck on that.
FYI, perplexity is an AI engine. It surveys literature, in this case,and summarizes. Does it truly understand what it is summarizing? Not really, but is sure sounds good.
So, I asked Perplexity about using cubic splines for forecasting. It is technically correct, given what it summarized.
. This helps fill gaps in historical data and provides a more complete picture for analysis.
Smoothing noisy data: Stock price data often contains noise and short-term fluctuations. Cubic spline smoothing can help reduce this noise while preserving the underlying trends, making it easier to identify longer-term patterns
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Modeling non-linear trends: Stock prices often exhibit non-linear behavior. Cubic splines are flexible enough to capture these non-linear trends in the data, providing a better fit than simple linear models
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Extrapolation for forecasting: Once a cubic spline model is fitted to historical data, it can be used to extrapolate future values, providing short-term forecasts of stock prices
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Yield curve modeling: In financial markets, cubic splines are commonly used to model yield curves, which can indirectly impact stock valuations
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Volatility surface modeling: For options pricing, cubic splines can be used to interpolate implied volatilities across different strike prices and maturities, which is useful for pricing and risk management
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The spline functions are connected at points called knots, ensuring smoothness and continuity
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The degree of smoothing can be controlled by adjusting the number of knots and the degree of the spline
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Care must be taken to avoid overfitting, which can occur if too many knots are used
It’s important to note that while cubic splines can be effective for short-term forecasting and capturing trends, they should be used in conjunction with other analysis techniques for more robust predictions. Additionally, past performance does not guarantee future results, especially in the volatile world of stock markets.
Comparing human health to economic health is a false and dangerous comparison. The economy won’t die from bad data. Humans might.
I’m not hooked on MA. It could be whatever math geniuses agree is better for smoothing data and getting better results. I use MA because it is easy for most people to understand.
SURELY, the FED, Treasury and/or Wall Street companies have studied data smoothing for government statistics but for unknown reasons, it has been rejected. My question is why?
Possibly the government likes using inaccurate data as it covers their real inability to actually do accurate forecasting of the economy and markets?
Perplexity is a good tool for gaining a summary overview of a question. Had I run the same question through Google, it would have presented me with hundreds of thousands of non-specific websites to wade through to try and obtain an answer from. That is a waste of time and why Google is going to crash bigly as AI gets more acceptance, since something like 80% of its revenue comes from search ads that people using AI services like Perplexity or chatGPT are not seeing.
If you’re looking to short a company, I’d suggest Google as a good candidate.
With this kind of mixed data, it’s hard to see a full-on recession yet.
Funny how the money printer and war machine work, isn’t it? Like painting that moldy part of the wall with fresh paint over and over again. Your tenant will swear the leaky pipe has been fixed each time you do it.
Um, because it is not ‘full-on’ yet. If it was, the US Fed deficit would expand at triple the current rate.
We are currently going sideways/slightly down. . We may well get through Christmas like this. However, a lot of marginal retailers will close as things stagnate.
The big question is what happens if SHTF, and where might it come from. We’ve already come close with Japan carry-trade. Looking at under-priced risk, it might be the massive derivatives market, but frankly I’m thinking stocks that are overpriced/under-yielded for the level of risk–low hanging fruit.
Continued high PE ratios and stock prices predicated on Fed-manipulated low yields are unjustified, so a slight bump in yields to address perceptions of growing risk might induce enough price adjustment to create a snowball.