Recession Data

This morning’s data was bad – worse than recent poor macro data; however, the market got yet another “stick save.” Thursday morning’s economic news was, in a word: RECESSIONARY.

Durable Goods data was stinky…New orders for manufactured durable goods in August decreased $30.1 billion or 13.2 percent to $198.5 billion, the U.S. Census Bureau announced today. This decrease, down following three consecutive monthly increases, was the largest decrease since January 2009 and followed a 3.3 percent July increase.

Excluding transportation, new orders decreased 1.6 percent. Excluding defense, new orders decreased 12.4 percent. Transportation equipment, down following four consecutive monthly increases, had the largest decrease, $27.8 billion or 34.9 percent to $51.9 billion.

Who needs durable goods data when surely other economic strength was able to pull GDP much higher than expected? After all, this is a recovery – right?

Uh, not so much. In fact, GDP and Durable Goods data were both so bad it made Art Cashin exclaim on TV that they were recessionary…and he’s correct.

ZeroHedge said the following about the all-important GDP data that has somehow become meaningless…

So much for the US recovery (we will never tire of saying that). After the first Q2 GDP revision bubbled up from 1.5% to 1.7%, the sell-side brigade was confident that the rate of growth would continue and final Q2 GDP would be in line. Instead, we got an absolute shock of a print, with the final Q2 GDP print coming in at a ridiculously low 1.25% (rounded up to 1.3%), below the lowest Wall Street estimate of 1.4%, and the lowest number since the revised 0.1% reported in January 2011. Here is the final GDP trendline: Q4 2011: 4.1%; Q1 2012: 2.0%; Q2 2012: 1.25%. Luckily, at least "housing has bottomed." The reason for the major contraction in the final print: a downward revision to all favorable components except Government which detracted the least from growth in years at just -0.14%. Of note - Personal Consumption was 1.06%, down from the 1.20% per the second revision. If nothing, we now know just what data Bernanke was looking at on an advance basis to come up with QEternity, and we also know the reason for the media and administration's all in gamble to reflate housing yet again. If the housing market does not go up courtesy of infinite cheap leverage, it could be curtains for the Bernanke reflation experiment.

Luckily, the centrally-planned policy vehicle once upon a time known as "the market" refuses to react to this horrendous, if only for the meaningless economy, news.

Trade well and follow the trend, not the so-called “experts.”

Behold the age of infinite moral hazard! On April 2nd, 2009 CONgress forced FASB to suspend rule 157 in favor of deceitful accounting for the TBTF banking mafia.

Larry Levin
President & Founder- Trading Advantage
TradingAdvantage.com

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