How is the economy doing? Well, it depends upon whom you ask. The vast majority of Americans have smaller incomes today than at the “end” of the Great Recession, but the top earners are doing just fine:
The stock market’s performance seems to reflect a rip-roaring recovery, as do real estate prices and the collectibles markets. The truth is that there is soft demand for labor, and this is depressing incomes. Until demand increases, the story will be a stagnant economy with the rich and corporations benefiting from cheap money and more of the same for workers.
Orders are volatile by their nature, but economists use this data because it may reveal information about the future. Changes in orders tip off changes in future production. Durable goods orders plunged over 7% this month, but this is not an unusual result due to the volatility in this series. What is concerning is the change in product shipments. The downward trend in shipments has happened twice before in the last 13 years. You can check for yourself to see what happened next.
Italy’s government has been unstable and unable to pass reforms since the Eurocrisis began. If the present government falls, there will be a swoon in Italian bond prices, but it will be short-lived. As long as the central banks are printing, the money has to go somewhere, and Italian banks seem willing to purchase whatever debt the government issues. Political intrigue will be insufficient to put a dent in these ultra-low rates.
Just like the Spanish Inquisition, no one escapes the Eurocrisis. Finland joins the Netherlands as an unlikely victim of the euro-malaise with shrinking output and national debt. The country will surpass a 60% debt to GDP ratio shortly as debt has almost doubled since the GFC. When considering the Eurozone breakup risk, don’t forget the strong. Finland is just as likely a candidate to leave the Euro as one of the PIIGS.
I am sure that if the PMI details showed solid growth that we would be seeing them today. Official Chinese growth data is meaningless, but that does not stop the mainstream media from “interpreting” the results for us. What does this chart mean?