Surging Orders In The Us Raise Capacity Worries

[interestrateripoff]

http://www.telegraph.co.uk/finance/economics/8353242/Surging-orders-in-the-US-raise-capacity-worries.html

The Chicago purchasing managers index (PMI) for the Mid-West region showed business optimism touched a 13-year high in February, while the new orders component was the highest since December 1983.

The release came as New York Federal chief Bill Dudley said the outlook was "considerably brighter than six months ago" with signs of "broadening and strengthening" across the board.

Mr Dudley said it would be foolish for the Fed to "over-react" to the commodity spike, blaming it on "temporary" factors that are unlikely to set off an inflation spiral when there is still so much slack in the US economy.

The latest jump in food prices is largely due to bad weather, while the rising cost of oil costs is double-edged since it acts as a tax on disposable income. "The pass-through of commodity prices into core measures of inflation has been very low in the US for several decades."

However, the PMI survey responses suggest that the Fed may have misjudged the level of spare capacity, lowering its guard against inflation risks.

Highest because it's coming from a very low base? Or are the 83 figures comparable?

This recovery is getting very exciting. All of our deficit and debt worries are going to disappear.

[Nationalist]

http://www.telegraph.co.uk/finance/economics/8353242/Surging-orders-in-the-US-raise-capacity-worries.html

This recovery is getting very exciting. All of our deficit and debt worries are going to disappear.

Not "our" worries - the Americans'.

And of course as they recover they must raise interest rates; and other currencies not following the raise will be less attractive and lose value, so they must raise to protect themselves...

[needsleep]

They're still applying fiscal stimulus to their economy. Osborne took the (ahem) sensible option of trashing our economy just as it was getting going again.

[Bloo Loo]

They're still applying fiscal stimulus to their economy. Osborne took the (ahem) sensible option of trashing our economy just as it was getting going again.

An economy that needs borrowing to stay afloat is no economy.

Its a ponzi scheme.

[MrFlibble]

An economy that needs borrowing to stay afloat is no economy.

Its a ponzi scheme.

Never a truer word spoken

[needsleep]

An economy that needs borrowing to stay afloat is no economy.

Its a ponzi scheme.

It depends but in the case of the US you're probably got a good point looking at things as they stand now. Some would say there's nothing wrong with using stimulus to get out of recession as long as there's a determinination to prevent over-heating and rebalance the books later after any deficit spending. In the US it currently looks like being one never-ending stimulus package without any thought cooling measures or counter-cyclical intervention but that will have to come eventually. I think they will ultimately come out of it better than we will. Much better.

Edited March 1, 2011 by needsleep

[Ruffneck]

Yes , even the AUD manufacturing index was positive last month for the first time in 6 or 7 months.

It's a manufacturing led recovery , everyone wins!

[mattyfc]

They're still applying fiscal stimulus to their economy. Osborne took the (ahem) sensible option of trashing our economy just as it was getting going again.

You mean getting back to the good old days. 10% y/y HPI, External debt rising to 400% of GDP. Very sustainable...

The UK economy is structurally unsound, there is far too much reliance on consumer spending, HPI, Government spending and debt. It has taken a good 10-15 years for the economy to become this bent out of shape. This structural deficiency is what caused our current economic problems; the idea that more of the same will fix it is insane.

Brown may have been able to sell the “international financial crisis” to people at home but the reason Sterling crashed and the economy performed so poorly compared to Germany etc is the emperor was found to be very naked indeed.

There will not be sustainable growth until the economy is rebalanced towards Saving, Investment exports and production. People need to wake up and realise there is no “get rich quick” return to growth. Another crash will follow if we try to spend our way to victory.

We are in for a decade + long slog of paying off debt and trying to get the economy back on a sustainable footing. There is no escape from this.

[interestrateripoff]

It depends but in the case of the US you're probably got a good point looking at things as they stand now. Some would say there's nothing wrong with using stimulus to get out of recession as long as there's a determinination to prevent over-heating and rebalance the books later after any deficit spending. In the US it currently looks like being one never-ending stimulus package without any thought cooling measures or counter-cyclical intervention but that will have to come eventually. I think they will ultimately come out of it better than we will. Much better.

When have politicians ever rebalanced the books? They just keep on borrowing to keep the boom times going, especially when they've abolished boom bust.

[aa3]

US recovery is starting to look real and like it is gaining momentum. They should be nearing the economic high mark of mid-2008 soon, and breakng into new territory.

They've got a lot of major industrial corporations seeing heavy orders coming in from the developing world. Deere, GM, Ford, Boeing, CAT, GE. And internal companies who were putting off upgrades and replacements are now coming in with big time orders. (which creates a virtuous cycle).

Tech is very stong right now too.. Intel, Microsoft, Oracle, HP, IBM, Dell, Apple.

QE 2.0 is working too, big end demand comes in, US dollar devalues to a more approriate level, and so far no inflation.

[Confounded]

US recovery is starting to look real and like it is gaining momentum. They should be nearing the economic high mark of mid-2008 soon, and breakng into new territory.

They've got a lot of major industrial corporations seeing heavy orders coming in from the developing world. Deere, GM, Ford, Boeing, CAT, GE. And internal companies who were putting off upgrades and replacements are now coming in with big time orders. (which creates a virtuous cycle).

Tech is very stong right now too.. Intel, Microsoft, Oracle, HP, IBM, Dell, Apple.

QE 2.0 is working too, big end demand comes in, US dollar devalues to a more approriate level, and so far no inflation.

Time to crash the stock markets to take the froth out of them and commodities and we could miss the worse of the building inflation.

Hotairmail's VOLAFLATION is the only way they can play it. Rinse and repeat enough times and we may get through this without the complete collapse that haunts us.

[needsleep]

When have politicians ever rebalanced the books? They just keep on borrowing to keep the boom times going, especially when they've abolished boom bust.

They never do it. When the good times come back there is no incentive to put the brakes on - it would make them unpopular. The classic Keynesian approach in the US seems to be delivering the growth it promises. Sill, the theory is nice if politicians and central banks have the guts to deal with the deficit spend later and the nous not to keep stimulating into the cyclical upswing that will eventually materialise. Which like you say they never do.

[needsleep]

You mean getting back to the good old days. 10% y/y HPI, External debt rising to 400% of GDP. Very sustainable...

The UK economy is structurally unsound, there is far too much reliance on consumer spending, HPI, Government spending and debt. It has taken a good 10-15 years for the economy to become this bent out of shape. This structural deficiency is what caused our current economic problems; the idea that more of the same will fix it is insane.

Brown may have been able to sell the “international financial crisis” to people at home but the reason Sterling crashed and the economy performed so poorly compared to Germany etc is the emperor was found to be very naked indeed.

There will not be sustainable growth until the economy is rebalanced towards Saving, Investment exports and production. People need to wake up and realise there is no “get rich quick” return to growth. Another crash will follow if we try to spend our way to victory.

We are in for a decade + long slog of paying off debt and trying to get the economy back on a sustainable footing. There is no escape from this.

I don't disagree. It boils down to where you want to start the restructuring process from:

1. A trashed economy off the back of a half-baked experiment driven by ideological cuts, enforced austerity and magical private sector expansion

2. An economy brought gently out of recession by fiscal stimulus. Substantial and well-timed cuts and efficiencies to follow later.

Neither is palatable.

[interestrateripoff]

I don't disagree. It boils down to where you want to start the restructuring process from:

1. A trashed economy off the back of a half-baked experiment driven by ideological cuts, enforced austerity and magical private sector expansion

2. An economy brought gently out of recession by fiscal stimulus. Substantial and well-timed cuts and efficiencies to follow later.

Neither is palatable.

I'd say 1 is near, but it was half-baked expansion policies which have created a unsustainable boom, now we have a choice of austerity or total financial collapse. Neither option will prove popular with the electorate.

[ralphmalph]

They never do it. When the good times come back there is no incentive to put the brakes on - it would make them unpopular. The classic Keynesian approach in the US seems to be delivering the growth it promises. Sill, the theory is nice if politicians and central banks have the guts to deal with the deficit spend later and the nous not to keep stimulating into the cyclical upswing that will eventually materialise. Which like you say they never do.

Thatcher tried to rebalance the books and got elected three times, Major one another election whilst reducing government borrowing and then Blair one the first election on keeping to the austerity spending plans. The British people will accept austere times if the economy is bad but obviously want spending back when the economy is enjoying good times.

All the surveys in the UK at the moment show that more of the public support the spending cuts than do not. The anger is that they think the govt is cutting the wrong things i.e keeping international aid whilst sacking servicemen.

Also the mid term elections in the US showed that there is a lot of public support there to cut spending.

[needsleep]

Thatcher tried to rebalance the books and got elected three times, Major one another election whilst reducing government borrowing and then Blair one the first election on keeping to the austerity spending plans. The British people will accept austere times if the economy is bad but obviously want spending back when the economy is enjoying good times.

All the surveys in the UK at the moment show that more of the public support the spending cuts than do not. The anger is that they think the govt is cutting the wrong things i.e keeping international aid whilst sacking servicemen.

Also the mid term elections in the US showed that there is a lot of public support there to cut spending.

1988 and 1989 were the only years the Tories balanced the books and achieved a surplus. The early 90s was a complete and utter disaster and took us to the brink. The austerity of the 80s was not universally accepted. There were an awful lot of f%c*ed-off people. I remember it very well. People didn't accept what happened then because of the perceived unfairness of it, because of the overt attacks on our industrial base and industrial communities - that has come back to haunt us with insufficient manufacturing/industrial capacity to pull us out the mess and Cameron harping on about the big society repeairing our communities, many of which were ripped apart by his party in the first place.

Like you say there is a general acceptance that we need cuts but the coalition has got to be careful they keep them rational and fair, which they're not really doing at the moment.

[Agentimmo]

Indeed. Many people still have memories about how the last major recession in the 80s was tackled by govt. I suspect this time around quite a few will refuse to play ball. Not being able to strike, they will just start avoiding taxes............

[Harry Sacks]

Never a truer word spoken

If it was true, it's not.

I can't think of any economy on Earth that doesn't borrow into existence its means of exchange.

[thod]

Why should insufficient capacity in the US make an difference? They have imported most of their goods for decades. If demand in the US is growing, there are plenty of Chinese factories willing to take up the slack.

[erranta]

I don't disagree. It boils down to where you want to start the restructuring process from:

1. A trashed economy off the back of a half-baked experiment driven by ideological cuts, enforced austerity and magical private sector expansion

2. An economy brought gently out of recession by fiscal stimulus. Substantial and well-timed cuts and efficiencies to follow later.

Neither is palatable.

Withdrawing monies from the general population/less wealthy reduces everyday spending in our economy which creates/provides income for companies = jobs.

Reducing jobs reduces govt tax take and they still have to pay compensation to people forced out of a job!

If you redirect the cash to the City/uber wealthy they will just hold on to it and redirect it offshore or spend it on massive boats etc most of which are not made here.