Wednesday, March 27, 2013

I have no idea what is going to happen in 2013

From T. Kevin Swift, the chief economist of the American Chemistry Council (emphasis mine):
Economists get a look at future economic growth by tracking the sale of chemicals and the state of the chemical industry. Kevin Swift of the American Chemistry Council developed the index, and said it points to modest growth over the next six to nine months. 
"Generally expanding activity, into the third quarter, almost into the fourth quarter, signaling growth that would probably be about 2.5 to 3 percent in terms of industrial production," he said. 
Swift says chemicals are used early in nearly every industrial process, which gives experts several months notice of changes in the direction of economic growth. If manufacturers want more materials, they may have orders for more products. If chemical sales fall, then the economy is probably slowing down.
From our favorite DOOOOOOOOOOOOOOOOOMer, Paul Hodges:
So far, the US appears stronger. But the blog has always worried that today's apparent recovery has been heavily influenced by political developments, with the administration naturally doing everything it could to support the economy in the run-up to last November's presidential election. And Q1 railcar loadings, "the best real time indicator of industry activity" according to the American Chemistry Council, are down 1.4% versus 2012. 
Q2 could be very difficult indeed, if today's lower level of demand continues. January and March are normally 2 of the 4 strongest months in the year. Yet as the chart above shows, prices for the products in the blog's Downturn Monitor portfolio are all now falling quite sharply. 
Yet financial markets continue to assume 'all is for the best, in the best of all possible worlds'.
US inventories rose by an astonishing 1% in January (twice the expected amount, according to Bloomberg). Yet this was taken as a sign that companies was stocking up ahead of an expected boom. More likely, however, it indicates that sales were actually much lower than expected. 
This is further confirmation, if any were needed, that oil and western stock markets have lost their essential role of price discovery. Instead they are being carried along on a flood of central bank liquidity. The moment when they reconnect with reality could well be very painful.
I love how Hodges uses an ACC number to justify his relatively downbeat analysis for 2013.

I have no idea how the economy looks for Q3 and Q4. My guess? Muddling along (i.e. GDP growth at about 2% or so.) If I had to pick a direction, up or down, I'd pick up.

[That means it will probably be down.]

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