Today several economic indicators were released today that show worrisome signs that the economy is slowing down. The Commerce Department reported that orders for durable goods decreased over 13% in the month of August. That is the largest single-month decrease since the U.S. was in the middle of the recession in January 2009. What this number indicates is that the already anemic manufacturing sector of the U.S. economy is sputtering. Savings and production are things most necessary for a true economic recovery, so this news should not be viewed lightly.
Secondly, second quarter measurements of GDP growth were revised downward from 1.7% to 1.25%. This is the third estimate of Q2 GDP, and it is the lowest estimate yet. These numbers are measuring the successes from the last quarter of the Fed’s QE2 and Operation Twist plans. Since the economy is relying upon monetary stimulus to stay afloat any gains that may be felt in the economy are always short-lived, and that is what we are witnessing here. Much like QE1 and QE2 before, the economy will most likely see a short term bump in economic indicators over the next few months (just in time for the election) as result of QE3, but the plan will ultimately meet the same fate as its predecessors: a short-lived solution that prevents the economy from re-balancing all the malinvestments while making the overall situation worse by creating massive monetary inflation that will ultimately lead to rising prices, further destabilizing the economy.
An interesting point to note here about each of these negative announcements is the fact that the “experts” were “surprised” about the findings. Economists have a terrible track-record when it comes to predicting not only the magnitude, but also the direction, of economic indicators.
Government numbers are routinely over-stated in their initial reports in which they are announced to tremendous fanfare and celebration, only to be negatively revised months with little to no mainstream press attention (the same goes for unemployment numbers, new jobless claims, etc.). As I write this at 4:00 pm, there are ZERO stories of these negative reports on any of the mainstream news websites’ home pages (FoxNews, MSNBC, or CNN), as well as on the leading financial news websites (CNBC and Bloomberg).
Note: There are a few reports of lowered jobless claims….look for that number to be revised upward over the next month or so as well.