Global manufacturing output is now falling according to official data, there is no economic recovery

Posted on 04 June 2013 with 2 comments from readers

Let’s put this as simply as we possibly can because there are still those deluded bulls on Wall Street who think the world economy is in a US-led recovery. Well it is not and the official data series show it. US factory output was down last month according to the widely followed ISM index.

Of course the shills proclaim it a rogue month. But if you look at the data from the rest of the world recently this is actually the start of a new trend downwards, not a blip in the statistics. Besides even the optimists would have to concede that the US data is so close to the line that a small amount either way makes little difference.

2009 levels

The ISM Index at 49 was actually at the lowest level since the depths of the global financial crisis in mid-2009. Remember that was the year global trade contracted and the world’s banking system came close to collapse? If this is an expansion then ArabianMoney is a pink elephant.

Just consider what the OECD had to say about the US economy in its last report. It noted that the 3.2 per cent tightening of fiscal policy this year in the sequestration is the biggest squeeze in 50 years. Only a fall in the US savings rate and bubbles in the stock market and housing kept the US economy above water in the first quarter.

At the same time manufacturing output data is weaker than expected for China, Korea, India and Russia. Partly this is the otherside of the Japanese currency depreciation shock this year and how that is playing out for rival Asian countires who find the terms of trade suddenly turned against them.

Illusionary recovery

In the US money printing has driven the rise in the stock market and house prices and produced an illusion of recovery for the wealthy. It’s a bubble economy that will deflate.

What will bring this party to an end is a realization that there is no economic recovery, and not only is there none in sight but we do have to go through an awful recession again before one can happen. The recovery will only come after higher interest rates and a bond crash to reset asset values.

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How long can the Fed put back that date? Bond yields are on the way up. Bond prices fell the most in three years last month. The real crisis may not be so far away now.