Getting Real About Factory Orders

                                                           

August 03, 2021   Today's Top Stories From the Breitbart News Desk The bond market refused to cooperate with the narrative that June U.S. factory orders had come in "better than expected" in Tuesday morning's report from the U.S. Census Bureau. Economists had forecast that orders of U.S. made goods would rise by around one percent, well below the 1.5 percent gain announced. The prior months' gain was revised up from a 1.7 percent gain to a staggeringly high 2.3 percent gain. That would ordinarily be expected to cause a bit of a sell-off in bonds, pushing yields up, on the idea that the economy was stronger than expected and the Fed might begin to rein in accommodation sooner or swifter than expected. But bond yields fell on the news, indicating that investors were taking a more cautious stance. It was as if the market was having some trouble believing that the U.S. manufacturing sector, which has expanded in 13 out of the past 14 months, was really growing that fast — especially with snarled supply chains, shortages everywhere, and consumers getting whacked by unexpectedly high prices. As it turns out, the bond market may have had a point. The Census Bureau's factory orders get reported in nominal dollars, which is to say that they aren't adjusted for inflation. For the past decade, that hasn't mattered much. When the nominal value of purchases of U.S. made goods went up, so did the real value, more or less. A higher than expected report on new orders meant that more goods were being purchased from U.S. factories. That's not the case in our era of inflation. A 1.5 percent rise in new orders might just reflect a 1.5 percent gain in the prices of things factories are selling. Or, if prices are rising faster than that, factory output could be falling even while the nominal value of orders is rising. This seems to have been the case in June. "If we look at the Bureau of Labor Statistics' 'Processed Goods for Intermediate Demand' price index, we observe that in June, that index shot up by 1.9 percent, an inflation rate that exceeds the 1.5 percent increase in factory orders for June," Johns Hopkins University's Steve Hanke told us when we inquired on Tuesday. "This suggests that, when measured in terms of the quantity of output, factory orders in June declined a bit. So, it looks like the 'enduring manufacturing strength' story doesn't seem to hold much water." In other words, the headline figures celebrating factory orders as a sign of strength in the manufacturing sector were wrong. It's the illusion of strength. What we're seeing is inflation scrambling the signals sent by economic data. And after so many years of low inflation, it may take a bit of time for the market and media to catch on. – Alex Marlow & John Carney Breitbart News Network     TOP STORY   Carney: Bidenflation Concealed Falling Factory Orders in June New orders for U.S.-made goods increased more than expected in June, but that probably is not a sign of enduring strength for manufacturing. It is more likely a sign of how inflation is scrambling our economic signals. This is because, despite the headlines, real factory orders and manufacturing output likely fell in June. Let's start with the basics. The Commerce Department said on Tuesday that factory orders climbed 1.5 percent in June after jumping 2.3 percent in May. Economists polled by Reuters had forecast factory orders increasing 08 percent, according to Econoday. [Click here for more]   IN OTHER STORIES... 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