Consumer prices dropped last month, the most since 1947. Yeah, much of it was due to energy prices spiraling down, but still…..
Deflation is a reality that is here and now. Look for consumer spending to continue to decline, as people favor saving money, rather than blowing it on worthless Chinese toys and Pet Rocks over the Christmas season.
The foreign markets continue to get the BRIC to the cranium, which shows just how far reaching this crisis has come. It was not too long ago that every other financial writer and blogger was expounding on and singing the praises of how all the emerging countries were going to “de-couple” from the U.S. due to their newly found prosperity. Yeah, right. And, just in case you didn’t realise [sic] it, trade activity can no longer be counted on to catapult U.S. activity forward.
As recently as last month, the IMF revised it’s forecast for a slowdown in global growth from 2.95% to 2.2% for 2009. That might be optimistic. (By the way, the IMF stands for International Monetary Fund, not “Impossible Mission Force”). I say that because we know that the manufacturing sector is bad, but one only need look at the non-manufacturing numbers, to get a full flavor of how bad this is getting.
| ISM NON-MANUFACTURING SURVEY RESULTS AT A GLANCE COMPARISON OF ISM NON-MANUFACTURING AND ISM MANUFACTURING SURVEYS* NOVEMBER 2008 |
|||||||||
|---|---|---|---|---|---|---|---|---|---|
| Non-Manufacturing | Manufacturing | ||||||||
| Index | Series Index Nov. |
Series Index Oct. |
Percent Point Change |
Direction | Rate of Change |
Trend** (Months) |
Series Index Nov. |
Series Index Oct. |
Percent Point Change |
| NMI/PMI | 37.3 | 44.4 | -7.1 | Contracting | Faster | 2 | 36.2 | 38.9 | -2.7 |
| Business Activity/Production | 33.0 | 44.2 | -11.2 | Contracting | Faster | 2 | 31.5 | 34.1 | -2.6 |
| New Orders | 35.4 | 44.0 | -8.6 | Contracting | Faster | 2 | 27.9 | 32.2 | -4.3 |
| Employment | 31.3 | 41.5 | -10.2 | Contracting | Faster | 7 | 34.2 | 34.6 | -0.4 |
| Supplier Deliveries | 49.5 | 48.0 | +1.5 | Faster | Slower | 2 | 48.4 | 49.2 | -0.8 |
| Inventories | 46.0 | 48.0 | -2.0 | Contracting | Faster | 3 | 39.1 | 44.3 | -5.2 |
| Prices | 36.6 | 53.4 | -16.8 | Decreasing | From Increasing | 1 | 25.5 | 37.0 | -11.5 |
| Backlog of Orders | 39.5 | 44.0 | -4.5 | Contracting | Faster | 4 | 27.0 | 29.5 | -2.5 |
| New Export Orders | 34.5 | 50.0 | -15.5 | Contracting | From Unchanged | 1 | 41.0 | 41.0 | 0.0 |
| Imports | 40.0 | 52.0 | -12.0 | Contracting | From Growing | 1 | 37.5 | 41.0 | -3.5 |
| Inventory Sentiment | 65.0 | 67.5 | -2.5 | Too High | Slower | 138 | N/A | N/A | N/A |
| Customers’ Inventories | N/A | N/A | N/A | N/A | N/A | N/A | 55.0 | 55.0 | 0.0 |
Observe how the index of new export orders has collapsed from 50.0 in October, to 35.5 in November. In addition, imports are decreasing, AS ARE PRICES.
Deflation is here, as treasury bond prices have correctly predicted. A low interest rate policy by the Fed and fiscal authorities will hold levels here or lower. That means that bonds may continue perform well for an extended time. The stock market is toast.
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