Manufacturing Sector is Behind US Economic Slowdown by Andrei Tratseuski
The case has been made on countless occasions that the manufacturing sector, not service sector, has been pulling the US economy out of the recession. In the matter of fact all around the world, manufacturing sector proliferated, not service. So global recovery in general has been pushed primarily by the manufacturing. Nonetheless, the robust growth in the sector has dwindled. Unfortunately, the manufacturing sector and its growth is being reduced.
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One of the reasons why the U.S. Dollar fell so drastically during this month was because of fears of a double dip recession. Despite the fears are overblown as usual, concerns still mount. As already mentioned manufacturing sector has been the driving force behind the economy. However, this growth has been drastically undermined as manufacturing sector is beginning to feel downward pressures. Looking at the figures we find that the manufacturing sector has been moderating in its growth for 3 consecutive month. The biggest gauges of the sector: Manufacturing ISM, Empire Manufacturing, and Philly Fed have been drastically reduced. However, when the economy was in a recovery phase, the manufacturing sector and all of the aforementioned indicators were growing. So, what we can take out of the figures is that the economy is under pressure.
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Manufacturing sector also has been among the leading creators of jobs as noticed by the figures. Over the course of previous 6 month the sector added 136,000 jobs. Yet, the growth of the jobs has also moderated and looks like to head into reducing territory.
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Getting back to the troubles in the US, we have the following dilemma. Labor market is not only moderating, latest Non-Farm Payrolls showed a reduction of 125,000 jobs. The housing market is in relatively horrible shape, existing home sales are down 2.2% in May, while New Home Sales are on multi-decade low figure of 300,000 pace. Consumer is spending considerably less, confirmed by the latest retail sales which printed at -0.5%. Furthermore, deflationary pressures are originating, and causing a relatively high amount of fear. Adding all of the factors together we find that the economy is dropping at a quick rate. Previously prompted by artificial stimulus, the economy does no longer has the following luxury. Yet, if the manufacturing sector continues to turnaround and have a robust growth, the economy can follow.
In retrospect, investors have started to shift from US Dollar exposures and into other currencies. For the following reason the Euro has rallied tremendously from a bottom of 1.1875 in June to current level of 1.2900. Other currencies have experienced gains as well. The markets are interpreting the information as: US economy is weakening, so shall its currency. Keep seeing downward pressures on the US Dollar, if economy continues to slowdown.
One of the reasons why the U.S. Dollar fell so drastically during this month was because of fears of a double dip recession. Despite the fears are overblown as usual, concerns still mount. As already mentioned manufacturing sector has been the driving force behind the economy. However, this growth has been drastically undermined as manufacturing sector is beginning to feel downward pressures. Looking at the figures we find that the manufacturing sector has been moderating in its growth for 3 consecutive month. The biggest gauges of the sector: Manufacturing ISM, Empire Manufacturing, and Philly Fed have been drastically reduced. However, when the economy was in a recovery phase, the manufacturing sector and all of the aforementioned indicators were growing. So, what we can take out of the figures is that the economy is under pressure.
Manufacturing sector also has been among the leading creators of jobs as noticed by the figures. Over the course of previous 6 month the sector added 136,000 jobs. Yet, the growth of the jobs has also moderated and looks like to head into reducing territory.
Getting back to the troubles in the US, we have the following dilemma. Labor market is not only moderating, latest Non-Farm Payrolls showed a reduction of 125,000 jobs. The housing market is in relatively horrible shape, existing home sales are down 2.2% in May, while New Home Sales are on multi-decade low figure of 300,000 pace. Consumer is spending considerably less, confirmed by the latest retail sales which printed at -0.5%. Furthermore, deflationary pressures are originating, and causing a relatively high amount of fear. Adding all of the factors together we find that the economy is dropping at a quick rate. Previously prompted by artificial stimulus, the economy does no longer has the following luxury. Yet, if the manufacturing sector continues to turnaround and have a robust growth, the economy can follow.
In retrospect, investors have started to shift from US Dollar exposures and into other currencies. For the following reason the Euro has rallied tremendously from a bottom of 1.1875 in June to current level of 1.2900. Other currencies have experienced gains as well. The markets are interpreting the information as: US economy is weakening, so shall its currency. Keep seeing downward pressures on the US Dollar, if economy continues to slowdown.
- 15 July |
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