The manufacturing economy continues its slow and steady recovery. Good thing. The collapse was so dramatic that the entire durable goods supply chain retreated by almost 50%. Once production levels have been scaled back, getting back up to speed and synchronized is the most complex management problem in business. Any attempt to ramp faster would be met with supply starvation.With durable goods now leading the way it looks like a real recovery is under way. Auto retail sales increases also bode well for sustainability. Only housing remains on the sidelines. With the long delays in cleaning up the foreclosure mess, this may hang on for a while. We now find that 40% of the homes processed through the government aid program are in foreclosure again.
- Industrial production was off 0.1% month-to-month. Probably not a serious issue give the strong January performance.
- Durable goods new orders increased 0.9% in February.
- Durable goods shipments declined slightly; now balanced with orders.
- Durable goods employment grew by 21,000.
- Durable goods deliveries are still slow (average 5.5 months vs. normal of 4).
- Core retail (excludes autos, gas, food service) grew again, this time by 0.8%. Now above record year of 2008.
- Autos grew by 6.7% in February. First serious growth in two years.
- Capacity utilization is still well below normal levels. Long way to go to get back to normal.
- Health care legislation has started a rush by manufacturers to seek alternatives. Major write downs due to increased costs is just the beginning. Attempts to control costs via price controls will produce the same result as under Nixon and Carter. Expect much higher costs and problems with availability and quality.
- Paul Volker (Obama Economic Advisor) is floating the idea of a value added tax and/or a carbon tax as ways to deal with the huge deficit projections. Either will damage the economy. See more info next month.
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