Economic Reports Indicate Economy Entering Crash Mode – Dave Kranzler

Weaker-than-expected headline data in the next week should push consensus expectations meaningfully towards an outright quarter-to-quarter contraction for the April 29th initial estimate of first-quarter 2015 GDP growth. Once all revisions are in place, that first-quarter GDP contraction should be the deepest since the economic collapse from 2007 into 2009, and it would raise serious market concerns for a subsequent, second-quarter GDP downturn (release on July 30th) and formal recognition of a “new” recession.  – John Williams,Shadowstats.com, April 10, 2015

TND Guest Contributor:  Dave Kranzler

Although the retail sales report for March showed a small bounce from February, it missed consensus estimates by a country mile.  The sales report was boosted by a jump in auto sale in March.  Based on various reports, it sounds like the U.S. Government used taxpayer money to boost their purchases of cars from GM and likely Ford, in order to keep union workers employed.

And, as a matter of fact, the GM sales report for March directly states that “Government sales were up 19% and rental deliveries were down 6%” (link).   So there you have it.  GM’s sales year over year for March were down 2%.  It might have been a disaster if the Government hadn’t stepped in with your money to buy up bulging factory inventory.

Speaking of inventories, the business inventory to sales ratio is starting to mirror the stock market and the dollar and go parabolic:

The parabolic move in the ratio is not due to manufacturing and industrial output, as we’ll see in a minute, it’s because final demand is tanking – along with the middle class.  Note:  The U.S. is China’s biggest customer and China’s exports PLUNGED in March.  Note:  the financial media will NEVER present this data and connect the dots.

Implications…are severely negative for the U.S. dollar, since happy presumptions of ongoing U.S. economic recovery and growth, and expectations of tightening actions by the Fed are likely to fall apart. Some minor pullback in the dollar already has taken place, following the recent signs of mounting U.S. economic weakness. Again, unanticipated by the global markets, these issues have begun to threaten domestic U.S. economic and monetary-policy expectations. Implications also will become increasingly negative for domestic banking-system stability, domestic fiscal policy and related borrowing needs by the U.S. Treasury.  – John Williams, link at the top

This morning the Empire Manufacturing Survey was minus 1.19 vs. “happy presumptions” from Wall Street of plus 7.0.  That is a serious miss.   New orders crashed to -6.0.  Note:  new orders reflects excessive business inventories and plunging end user demand.

Industrial production for March reported this morning also plunged minus .6% from February.  The Wall Street Ponzi scheme snake oil selling crowd expected a smaller decline of .3%.

While the fraud-promoting financial media and Wall Street spinmeisters might start mumbling comments about the weather, we know that the weather across most of the country in March was warmer than normal. I know I played tennis in Denver outside several times during March. That’s highly unusual for March, which is typically the wettest month here in terms of snow.

Given that the consumer has been 70% of the GDP ever since Greenspan’s “maestro” printing press engineered the “it’s different this time new economy,”  perhaps this chart correlates almost perfectly with the path of the general economy:

Given that the economy appears to be entering “crash mode,” and given that the money supply is now almost 5x higher than it was in 2009, and given that Treasury debt outstanding is now $7 trillion dollars – or 64% – higher now than in 2009, and given that interest rates can only go negative, I would suggest that the Fed is out of tricks and what is coming at us in the system is going to be much WORSE than what occurred in 2008.

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About Dave Kranzler:

 I spent many years working in various analytic jobs and trading on Wall Street. For nine of those years, I traded junk bonds for Bankers Trust. I have an MBA from the University of Chicago, with a concentration in accounting and finance. My goal is to help people understand and analyze what is really going on in our financial system and economy. You can follow my work and contact me via my website Investment Research Dynamics.  Occasionally, I publish on Seeking Alpha too. As a co-founder and principal of Golden Returns Capital, LLC Mr. Kranzler co-manages the Precious Metals Opportunity Fund, a metals and mining stock investment fund.

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