Counterparties: The global manufacturing slowdown
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It’s a holiday week, which means that you should be doing relatively little. Unfortunately, the world economy seems to be doing exactly the same.
In the US, today’s data from the ISM showed “contraction in the manufacturing sector for the first time since July 2009″. (As usual, Reuters’ Scotty Barber has the charts.) There were two particularly troubling data points. No one seemed very interested in buying things – new orders fell at the fastest pace in a decade; and people paid less for those things – prices paid fell at the fastest rate since just after 9/11. This is, as one analyst put it to the WSJ, a bad omen: “It is only a matter of time before the service sector mirrors the real goods slowdown and overall employment gains moves from sluggish to worse.”
In its own manufacturing index released today, Markit Economics suggested the US manufacturing industry is slowing, but not quite in contraction. But like the ISM report, Markit’s data also showed that new orders fell. And the company’s own economist acknowledged that “the ISM suggests something drastic happened in June”.
Then there’s Asia, where South Korea and Japan are in full manufacturing contraction territory. China’s manufacturing sector also shrank in June, and, as Kate Mackenzie notes, “the components of the index suggest the companies surveyed were busily producing without necessarily having any customers lined up”. Zero Hedge has BofA’s compilation of all of the grim global details: 17 of 24 major economies’ manufacturing sectors are now shrinking. Add all this up, and it explains why, globally, the manufacturing sector is technically in contraction.
Thank God US fiscal policy is going to help out. Oh… wait. – Ryan McCarthy
On to today’s links:
Obamacare is the biggest tax increase in history…if you ignore history – The Incidental Economist
Reddit’s fantastic, in-depth Obamacare explainer – Reddit
The second-largest natural-gas producer in the US has paid almost no income taxes on its profits in two decades – Bloomberg
Obama, the Supreme Court and “the bipartisan allergy to taxes” – Economist