Post by unlawflcombatnt on Mar 6, 2007 15:47:46 GMT -6
AP economics writer Martin Crutsinger has written an good article summing up today's economic news, titled Factory orders dive amid broad declines. Below are selected excerpts from this article posted at Yahoo News.
"Factory orders dive amid broad declines
By MARTIN CRUTSINGER, AP Economics Writer
Tue Mar 6, 10:32 AM ET
Orders to U.S. factories fell by the largest amount in 6 1/2 years in January, reflecting widespread declines across a number of industries.
The Commerce Department reported that total orders dropped by 5.6 percent in January, the biggest decline since July 2000, a period when the economy was slowing sharply in advance of an actual recession which began in 2001.
The government said that orders for big-ticket durable goods plunged by 8.7 percent, even bigger than the 7.8 percent drop that had been reported a week ago. That report, which increased worries about the economy's health, played a role in the 416-point single-day drop in the Dow Jones industrial average a week ago.
The report on factory orders, coupled with other data showing weaker-than-expected activity, have raised concerns that the current economic slowdown may be more serious than previously expected...."
In other economic news, the Labor Department reported that productivity, the amount of output per hour of work, rose at an annual rate of 1.6 percent in the October-December period last year. That was about half of the 3 percent increase the government initially estimated a month ago.
Labor costs for each unit of output soared by 6.6 percent in the fourth quarter, far higher than the 1.7 percent increase initially reported and the 3.2 percent revision that Wall Street had been expecting....
With less output and the number of hours worked remaining the same, productivity for the quarter looked worse. The drop in output also meant that unit labor costs were higher.
It was the biggest quarterly increase in labor costs since a 9.1 percent surge in the first three months of 2006. Both gains were attributed in large part to big bonuses paid to high-income workers....
For the year, productivity rose by 1.6 percent in 2006, the slowest annual increase in nine years."
The full article can be found at Factory orders dive amid broad declines.
The historic formula for predicting maximum potential GDP growth is the sum of productivity growth plus labor force growth. With a labor force growth of about +0.9% and productivity growth of +1.6%, that leaves a maximum "potential" GDP growth of +2.5% for 2006. This is in contrast to the BEA's stated real GDP growth for 2006 of +3.3%. This puts GDP growth at +0.8% more than maximum potential growth. This is not only a dubious GDP growth number, it's unsustainable. Most (if not all) of this extra growth is from consumption financed with borrowed money & credit.
Look for further downward revisions of 2006 GDP growth, as the previous "guest-imates" are replaced with actual recorded numbers.
"Factory orders dive amid broad declines
By MARTIN CRUTSINGER, AP Economics Writer
Tue Mar 6, 10:32 AM ET
Orders to U.S. factories fell by the largest amount in 6 1/2 years in January, reflecting widespread declines across a number of industries.
The Commerce Department reported that total orders dropped by 5.6 percent in January, the biggest decline since July 2000, a period when the economy was slowing sharply in advance of an actual recession which began in 2001.
The government said that orders for big-ticket durable goods plunged by 8.7 percent, even bigger than the 7.8 percent drop that had been reported a week ago. That report, which increased worries about the economy's health, played a role in the 416-point single-day drop in the Dow Jones industrial average a week ago.
The report on factory orders, coupled with other data showing weaker-than-expected activity, have raised concerns that the current economic slowdown may be more serious than previously expected...."
In other economic news, the Labor Department reported that productivity, the amount of output per hour of work, rose at an annual rate of 1.6 percent in the October-December period last year. That was about half of the 3 percent increase the government initially estimated a month ago.
Labor costs for each unit of output soared by 6.6 percent in the fourth quarter, far higher than the 1.7 percent increase initially reported and the 3.2 percent revision that Wall Street had been expecting....
With less output and the number of hours worked remaining the same, productivity for the quarter looked worse. The drop in output also meant that unit labor costs were higher.
It was the biggest quarterly increase in labor costs since a 9.1 percent surge in the first three months of 2006. Both gains were attributed in large part to big bonuses paid to high-income workers....
For the year, productivity rose by 1.6 percent in 2006, the slowest annual increase in nine years."
The full article can be found at Factory orders dive amid broad declines.
The historic formula for predicting maximum potential GDP growth is the sum of productivity growth plus labor force growth. With a labor force growth of about +0.9% and productivity growth of +1.6%, that leaves a maximum "potential" GDP growth of +2.5% for 2006. This is in contrast to the BEA's stated real GDP growth for 2006 of +3.3%. This puts GDP growth at +0.8% more than maximum potential growth. This is not only a dubious GDP growth number, it's unsustainable. Most (if not all) of this extra growth is from consumption financed with borrowed money & credit.
Look for further downward revisions of 2006 GDP growth, as the previous "guest-imates" are replaced with actual recorded numbers.