Wednesday, June 24, 2015

Ed Morrissey: The Economic Cluelessness Burns

     Yesterday, we had a gem of analysis from Ed Morrissey over at Hot Air.  In a piece titled, "Durable goods decline 1.8%, business investment a mixed bag in May," he, once again, tries to downplay any economic advancement in the name of partisan politics.  It's actually pretty standard fair from a political blogger. 
     However, after reading his column, ask yourself the following questions: does he mention:
1.) The strong dollar and how that is hurting exports?
2.) The oil slowdown and how that is hurting mining/raw materials?
3.) The overall slow growth nature of the world economy and how that is also hurting exports?
For anyone who has been paying attention over the last year (as theoretically he has been), you'd know that oil's crash has led to massive capital expenditure cuts in the oil patch.  In fact, you can pretty much coordinate the starting point for weakness in industrial production and durable goods with this news event.  And, if you read such sources as Zacks on corporate earnings, you'd know the strong dollar has hurt international operations for the last two quarters.  And then there is the overall weakness in international sales, thanks to a variety of factors like the Chinese slowdown and EU weakness.  The latest anecdotal information from the latest ISM Manufacturing report highlights two to these points:
"Economy is showing signs of improvement." (Food, Beverage & Tobacco Products)
"Automotive is still strong. However, steel prices have dropped due to overcapacity and the strong US dollar." (Fabricated Metal Products)
"Overall business is steady. Employment in this area is up, a good sign." (Transportation Equipment)
"Strong spring demand in agriculture." (Chemical Products)
"The exchange rate on the dollar is hurting our sales in Asia. The conversion rate is lowering our profit in Europe where we sell in Euros." (Computer & Electronic Products)
"Sales are starting to stabilize and show improvement from prior months, Year to Date (YTD). Concerns still exist with the overall economy." (Apparel, Leather & Allied Products)
"Continued challenges in markets related to oil and gas industries." (Miscellaneous Manufacturing)
"Oversupply is continuing to tighten profit margins." (Wood Products)
"West Coast port issues have eased up and our incoming imports are flowing again." (Machinery)
"Chemicals pricing seems to have bottomed and is slowly rising again." (Plastics & Rubber Products)
(you'll also note the ISM report talks about the negative effects of the West Coast port strike, which he also downplayed in his 1Q GDP summation). 
     Morrissey likes to think he's a well-researched and thoughtful economic analyst.  However, he's nothing more than a partisan hack who waits for headline grabbing negative news to drive a political narrative.

     Quick Update: This is from the latest BOJ Meeting Minutes:

The U.S. economy continued to recover solidly, assisted by household spending, although adjustments had been seen in the industrial production sector mainly on the back of the decline in crude oil prices and the appreciation of the U.S. dollar. Business fixed investment had been relatively weak, partly due to a decline in investment related to energy; exports had also been somewhat weak due to the effects of external demand and developments in foreign exchange markets. However, private consumption had rebounded from a decline observed last winter, supported in part by a favorable employment and income situation. Housing investment had also followed a moderate pick-up trend. As for prices, the year-on-year rate of increase in the consumer price index (CPI) for all items less food and energy, or the core CPI, had been more or less flat while that for all items had been at around 0 percent, mainly due to the decline in energy prices.

Wow.  The Board of the Bank of Japan knows more about the domestic investment situation than Morrissey.  Go figure.