Investing Curiouscatblog

Tag: economy

  • Manufacturers Coming Back to the USA

    An increasing number of news articles are reporting on the increasing strength of manufacturing in the USA (and globally, actually).

    Made (once again) in America

    NovaSom chose Zentech Manufacturing Inc. for two key reasons: Executives here could oversee quality control, and the kits could be shipped to domestic customers in just days, not weeks or months.

    After years of American companies shipping jobs and contracts overseas, some are choosing local manufacturers or even “re-shoring” – bringing those jobs and work back to the United States.
    …
    One-fourth of more than 850 companies surveyed by MFG.com, a global online marketplace for manufacturers looking to source custom parts, returned work to North America from overseas in the last quarter of 2010.

    The “decrease” in manufacturing in the USA has been exaggerated as I written for year (manufacturing has grown steadily over the last few decades in the USA). It is true though manufacturing in some plants has moved overseas. Over the last few years more and more stories report on American companies moving manufacturing back to the USA that they had moved offshore previously.

    The Institute for Supply Management most recent survey reports a surge in US manufacturing to its highest reading in nearly seven years.

    Related: Manufacturing Cars in the USA – Leading Manufacturing Countries Globally (1980-2009) – Global Manufacturing Employment Data – 1979 to 2007

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  • USA Spends Record $2.5 Trillion, $8,086 per person 17.6% of GDP on Health Care in 2009

    U.S. health care spending increased yet again in 2009, increasing 4%. Total health expenditures reached $2.5 trillion, which translates to $8,086 per person or 17.6% of the nation’s Gross Domestic Product (GDP). This represents yet another record high percentage of GDP taken by health care – for decades, year after year, health care takes more and more of the economic resources of the country. The broken USA health care system costs twice as much as other rich countries for worse results. And those are just the direct accounting costs – not the costs of millions without preventative health care, sleepness nights worrying about caring for sick children without health coverage, millions of hours spent on completing forms to try and comply with the requirements of the health care system’s endless demand for paperwork, lives crippled by health care bankruptcies…

    Medicare spending grew 7.9% in 2009 to $502.3 billion. The senior citizen and health care lobbies have continued to increase spending on medicare. Too bad they can’t work on improvement instead of increased spending. Spending for fee-for-service (FFS) Medicare accelerated in 2009, increasing 5.5%. Medicare Advantage (MA) spending increased 15.8% in 2009 following 21.4% growth in 2008 and was primarily attributable to a continuation of significant increases in MA enrollment. Total Part D spending (which includes spending for benefits, government administration, and the net cost of health insurance) increased 9.3% to $54.5 billion in 2009.

    Medicaid (which is a line item for the cost of medical treatment for the un-insured, though far from the only cost): Total Medicaid spending grew 9.0% in 2009 to $373.9 billion was driven by a 7.4% increase in Medicaid enrollment. Federal Medicaid expenditures increased 22%, while state Medicaid expenditures declined 9.8%. This difference in growth is due to a significant increase in the Federal Medical Assistance Percentages (FMAP) used to determine federal Medicaid payments to states—a provision of the American Recovery and Reinvestment Act of 2009 (ARRA). Essentially the federal government funded the spending since the states were almost all out of money.

    Private Health Insurance: Private health insurance premiums grew 1.3% in 2009 (actually a pretty great figure by itself – unfortunately one lone good piece of data is not enough). Benefit payment growth increased 2.8% in 2009. These trends were heavily influenced by the recession, which resulted in private health insurance enrollment declines (which reminds you why looking at 1 piece of data isn’t a good idea). In 2009, spending for benefits increased faster than premiums, and as a result, the net cost of private health insurance (or the difference between premiums and benefits) fell to an 11.1% share of total private health insurance spending.

    The burden of the large costs of the health care system in the USA are financed by businesses (21%), households (28%), governments (44%), and other private sponsors [foundations, charities and the like] (7%).

    Read the complete National Health Expenditure Data report.

    Related: USA Spends Record $2.3 trillion ($7,681 Per Person) on Health Care in 2008 – USA Heath Care System Needs Reform – Resources to Help Improve the Health Care System – CEOs Want Health-Care Reform

  • China Grows GDP 10.3% in 2010

    China’s GDP grew 10.3% in 2010, 9.8% in the 4th quarter. China’s economy grew 9.2% in 2009. China likely became the 2nd largest economy in 2010, surpassing Japan. Inflation continues to be a worry with consumer inflation standing at 4.6% and producer inflation standing at 5.9%. Excessive real estate investing (pushing up prices and leading to what many see as overbuilding) also continues to be a worry that is growing.

    China quarterly growth surges, inflation eases

    industrial production grew 13.5% in December from a year earlier, up from a 13.3% rise in the prior month. Lu said industrial-production growth figures were among the most important of Thursday’s data batch, as it was barometer of the strength of underlying capital spending.

    “We expect GDP growth in year-on-year terms to moderate a bit from here,” Lu said. Tighter monetary conditions should see some easing in growth this year, forecasting full year growth expected at 9% and consumer inflation of 4%, according to Merrill’s estimates.
    …
    RBC revised its outlook for China’s growth this year to 9.5% from 8.8%, after trade data earlier this month showed imports and exports at record levels.

    Related: China GDP up 8.7% in 2009 – Rodgers on the US and Chinese Economies (2008)

  • Top 15 Manufacturing Countries in 2009

    China continues to grow manufacturing is output. In 2009, the USA, and most countries saw declines in manufacturing production. China, however, continued to grow. China is now finally approaching the level of manufacturing done in USA. The latest data again shows the USA is the largest manufacturer but China looks poised to take over the number one spot soon.

    chart of manufacturing production by leading manufacturing countries
    The chart showing manufacturing output by country was created by the Curious Cat Economics Blog based on UN data (in 2009 USA dollars). You may use the chart with attribution.

    The large decline in Germany was 23%. This was a 18% decline in Euro terms, and when you added the decline of the Euro the total USA dollar decline was 23%. Quite extraordinary. Most European countries were down over 15%. In fact, so extraordinary it makes me question the data. World economic data is useful and interesting but it isn’t perfect. USA manufacturing declined just .5%. China increased manufacturing production by 9%.

    The last 2 years, China has stopped separating out mining and utilities from manufacturing. The percentage of manufacturing (to manufacturing, mining and utilities) was 78% for 2005-2007 (I used 78% of the manufacturing, mining and utilities figure provided in the 2008 and 2009 data – but that could be wrong). The unadjusted 2009 China total was $2.05 trillion and for the USA the total manufacturing, mining and utilities was $2.33 trillion. In 2009, the manufacturing total was 76% of USA manufacturing, mining and utilities. The percentage varies significantly between countries (the Russian federation is about 55% and Japan about 91%) and various over time as a countries economy changes.

    The big, long term story remains the same. China has continued to grow manufacturing output tremendously. I see very little data to support the stories about manufacturing having to leave China to go elsewhere (especially when you look at the “lower wages” counties mentioned in news stories – they are not growing at any significant rate). The USA is still manufacturing a huge amount and that production has steadily grown over time.

    When you look back over the period from 1980 to today you can see

    1. The biggest story is the growth in Chinese manufacturing
    2. The USA started out the largest and has grown significantly
    3. Japan did very well from 1980 to 1995, and since they have struggled
    4. The USA, China, Japan are really far ahead of other countries in total manufacturing output, and Germany is solidly in 4th place.
    5. After that the countries are fairly closely grouped together. Though there are significant trends hidden by the scale of this graph, which I will explore in future posts. South Korea has growth significantly over this period, for example.
    6. The biggest macro trend that the data shows, but is not so visible in this chart (other than China’s growth), is the very strong performance of emerging markets (and in fact some counties have fully become manufacturing powerhouses during this period, most notably China but also, South Korea and Brazil). And I see that continuing going forward (though that is speculation).

    Two more interesting pieces of data. Italy is the 5th largest manufacturing country, I don’t think many people would guess that. Since 1980 Italy surpassed the UK and France but China rocketed passed them. And Indonesia has moved into 14th place, edging out Canada in 2009.

    I plan to take more time in 2011 to look at global manufacturing and other global economic data more closely and to write about it here.

    Related: Data on the Largest Manufacturing Countries in 2008 – Top 12 Manufacturing Countries in 2007 – Top 10 Manufacturing Countries 2006 – Leading global manufacturers in 2004

  • USA Unemployment Rate Rises to 9.8%

    The unemployment rate grew to 9.8% in November, and nonfarm payroll employment increased by 39,000 (less than the expected 150,000), the U.S. Bureau of Labor Statistics reported today. Temporary help services and health care continued to add jobs over the month, while employment fell in retail trade. The change in total nonfarm payroll employment for September was revised from -41,000 to -24,000, and the change for October was revised from +151,000 to +172,000.

    The unemployment rate has now remained above 9% for more consecutive months since data has been gathered since 1940.

    There are now 15.1 million unemployed in the USA. Among the major worker groups, the unemployment rates for adult men (10.0 %), adult women (8.4%), and teenagers (24.6%).

    The number of long-term unemployed (those jobless for 27 weeks and over) was little changed at 6.3 million and accounted for 41.9%. The number of persons employed part time for economic reasons (sometimes referred to as involuntary part-time workers) was little changed over the month at 9.0 million. These individuals were working part time because their hours had been cut back or because they were unable to find a full-time job.

    Among the marginally attached, there were 1.3 million discouraged workers in November, an increase of 421,000 from a year earlier. (The data are not seasonally adjusted.) Discouraged workers are persons not currently looking for work because they believe no jobs are available for them. The remaining 1.2 million persons marginally attached to the labor force had not searched for work in the 4 weeks preceding the survey for reasons such as school attendance or family responsibilities.

    Total nonfarm payroll employment changed little in November (+39,000). Job gains continued in temporary help services and in health care, while employment fell in retail trade. Since December 2009, total payroll employment has increased by an average of 86,000 per month.

    Within professional and business services, employment in temporary help services continued to increase in November (+40,000) and has risen by 494,000 since September 2009.

    Related: USA Economy Adds 151,000 Jobs in October and Revisions Add 110,000 More – Over 500,000 Jobs Disappeared in November, 2008 – Manufacturing Employment Data – 1979 to 2007
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  • Record USA Agricultural Exports Creates Some Strong Locations Economically

    Record U.S. Exports Reflect Midwest Boom With 3.7% Unemployment

    The agricultural Midwest — particularly North and South Dakota, Kansas and Nebraska — has been leading the U.S. economic recovery as its banks, businesses and households avoided the worst of the housing bubble’s collapse and the financial crisis that followed. Now the region is getting a further boost from record exports of commodities, driven by demand in China and Russia and a declining dollar. U.S. farm shipments next year may surpass the 2008 record of $115.3 billion, Joe Glauber, the U.S. Department of Agriculture’s chief economist, said last month.
    …
    The U.S. dollar has declined 7.3 percent in the second half of the year as food prices surged after cold in China, drought in Russia and parts of Europe, and flooding in Canada damaged harvests. The spot price of corn has gained 46 percent since July 1, wheat is up 28 percent and soybeans have risen 25 percent, according to the USDA. The S&P GSCI Agriculture Index added 41 percent, compared with the 17 percent advance in the broader S&P GSCI Index of 24 commodities.

    Farmland values also are rising. Land prices in some areas of the Federal Reserve Bank of Kansas City’s district — which includes Kansas, Nebraska, Wyoming and parts of Missouri — increased as much as 12 percent in the third quarter from a year earlier, the biggest jump since the fourth quarter of 2008, the Fed bank said Nov. 12.
    …
    While “the agricultural side of the Midwest is doing well,” the plains states “are very, very different than the industrial Midwest,” she said.

    Unemployment in Michigan is 13 percent, the second highest after Nevada at 14.4 percent. The jobless rate in the Detroit metro area has stalled above 13 percent for 21 months.

    There are reasons to believe this strength in commodities will continue. Though the global population is growing fairly slowly the increase in the global middle class is greatly increasing the demand for food and meat. To provide meat huge amounts of grains are used. When you add to it, crazy policies to promote ethanol the cost of food crops like corn have more pressure to increase. It is good to remember that the economy has many facets and parts of the economy are doing well (energy is also doing very well), thankfully. They help stabilize what could be an even worse overall economy.

    Related: USA Economy Adds 151,000 Jobs in October and Revisions Add 110,000 More – 3rd Quarter USA GDP Up 3% from 2009 – Real Estate, Consumer and Agricultural Loan Delinquency Rates 2000-2010 – Auto Manufacturing in 2009: USA 5.7 million, Japan 7.9 million, China 13.8 million

  • Consumer Debt Down, but Still Over $2.4 Tillion in the USA

    Consumers debt decreasing very slowly. In the 3rd quarter it decreased at an annual rate of 1.5%, after decreasing at a 3.25% rate in the second quarter. Revolving credit (credit card debt) decreased at an annual rate of 8.5% (compared to 9.5% in the second quarter), and nonrevolving credit (car loans…, not including mortgages) was up 2.5% (versus essentially unchanged).

    Revolving consumer debt now stands at $814 billion down $52 billion this year. That is on top of a $92 decline in 2009. Hopefully we can increase the size of the decrease going forward. As individuals we should aim to have no consumer debt and build up cash reserves instead (the way the debt figures are calculated though, even if you don’t really have any debt, say you pay off your credit card bill each month, I believe your balance is still seen as “debt”, it is credit extended to you).

    On September 30, 2010 total outstanding consumer debt was $2,411 billion (a decline of just $8 billion in the 3rd quarter, after a decline of $21 billion in the 2nd quarter). This still leaves over $8,000 in consumer debt for every person in the USA and $20,000 per family.

    Consumer debt grew by about $100 billion each year from 2004 through 2007. In 2009 consumer debt declined over $100 billion: from $2,561 billion to $2,449 billion. For the first 3 quarters of 2010 it has declined just $38 billion.

    The huge amount of outstanding consumer and government debt remains a burden for the economy. At least some progress is being made to decrease consumer debt. Credit card delinquency rates have actually been decreasing the last couple of year (from a high of 6.75% in the 2nd quarter of 2009 to 5% in the 2nd quarter of 2010 (I would guesstimate the average for the decade was 4.5%).

    Those living in USA have consumed far more than they have produced for decades. That is not sustainable. You don’t fix this problem by encouraging more spending and borrowing: either by the government or by consumers. The long term problem for the USA economy is that people have consuming more than they have been producing.

    We can’t afford to seek even more short term spending powered by more debt. Government debt has been exploding so unfortunately that problem has continued to get worse.

    Data from the federal reserve.

    Related: Consumers Continue to Slowly Reduce Their Debt Level – The USA Economy Needs to Reduce Personal and Government Debt – Consumer debt needs to decline much more.

  • USA Economy Adds 151,000 Jobs in October and Revisions Add 110,000 More

    Nonfarm payroll employment increased by 151,000 in October, and the unemployment rate was unchanged at 9.6%, the U.S. Bureau of Labor Statistics reported today. Since December 2009, nonfarm payroll employment has risen by 874,000.

    The BLS also increased previous estimates by 110,000 jobs in adjustments to August and September. The change in total nonfarm payroll employment for August was revised from -57,000 to -1,000, and the change for September was revised from -95,000 to -41,000.

    Adding 151,000 jobs last month (especially with a revision that adds 110,000to our previous estimates) is good news but not great news. We really need to be adding at least 250,000 and hopefully 400,000 for many months in a row. Both to keep up with population growth and restore some of the 8 million job losses from the credit crisis recession. The fears of a depression that some had a few years ago though are decreasing as we provide slow but real growth. However those gains are far from certain to continue, but overall things look much better than than did 2 years ago.

    In November of 2008 the economy lost over 500,000 Jobs and in October 2009 the unemployment Rate Reached 10.2%.

    The number of unemployed persons, at 14.8 million, was little changed in October. Among the major worker groups, the unemployment rate for adult men (9.7%), adult women (8.1%), teenagers (27.1%). The number of long-term unemployed (those jobless for 27 weeks and over) was about unchanged over the month at 6.2 million.

    Both the civilian labor force participation rate, at 64.5 percent, and the employment-population ratio, at 58.3 percent, edged down over the month.

    About 2.6 million persons were marginally attached to the labor force in October, up from 2.4 million a year earlier. (The data are not seasonally adjusted.) These individuals were not in the labor force, wanted and were available for work, and had looked for a job sometime in the prior 12 months. They were not counted as unemployed because they had not searched for work in the 4 weeks preceding the survey.
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  • 3rd Quarter USA GDP Up 3% from 2009

    Real gross domestic product increased at an annual rate of 2.0% in the third quarter, reaching a annual rate of $14,730 billion (that is, from the second quarter to the third quarter), according to the “advance” estimate released by the Bureau of Economic Analysis. In the second quarter, real GDP increased 1.7%. The 3rd quarter real USA GDP was up 3.1% compared to the 3rd quarter of 2009. Just scanning the headlines gives a hint why investors are moving money into emerging markets: China up 9.6%, India 8.8%, Brazil 8.8%.

    The third-quarter advance estimate released today is based on source data that are incomplete or subject to further revision (the “second” estimate for the third quarter, based on more complete data, will be released on November 23, 2010).

    The increase in real GDP in the third quarter primarily reflected positive contributions from
    personal consumption expenditures (PCE), private inventory investment, nonresidential fixed
    investment, federal government spending, and exports that were partly offset by a negative contribution from residential fixed investment. Imports, which are a subtraction in the calculation of GDP, increased.

    The small acceleration in real GDP in the third quarter primarily reflected a sharp deceleration in imports and accelerations in private inventory investment and in PCE that were partly offset by a downturn in residential fixed investment and decelerations in nonresidential fixed investment and in exports.

    The price index for gross domestic purchases, which measures prices paid by U.S. residents,
    increased 0.8% in the third quarter, compared with an increase of 0.1% in the second. Real personal consumption expenditures increased 2.6% in the third quarter, compared
    with an increase of 2.2% in the second. Durable goods increased 6.1%, compared with an
    increase of 6.8%.

    Related: Initial 4th Quarter 2009 Data Show USA GDP Increased at 5.7% Annual Rate – First Quarter 2009 USA GDP Down 6.1% – India Grew GDP 8.6% in First Quarter – China Economy Grows 11.9% in 1st Quarter
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  • Buffett Does’t See Double-Dip Recession for USA

    Buffett Rules Out Double-Dip Recession Amid Growth

    “We will not have a double-dip recession at all. I see our businesses coming back almost across the board.”
    …
    “I’ve seen sentiment turn sour in the last three months or so, generally in the media,” Buffett said. “I don’t see that in our businesses. I see we’re employing more people than a month ago, two months ago.”
    …
    [GE CEO] Immelt said. “We need people to be able to feel like they’re going to get loans, the process is going to work and that they understand the rules,” Immelt said. Signs across the world show growth improving as evidenced by a rise in GE’s orders

    Related: Warren Buffet Webcast to MBAs – Global Economy Prospects Look Good But Also at Risk (June 2010) – Auto Manufacturing in 2009: USA 5.7 million, Japan 7.9 million, China 13.8 million