The president touted a manufacturing renaissance. However, economic indices show US manufacturing entering a Dark Age. Home sales are not looking bright, either.
Peter explains in his recent podcast:
Manufacturing is a complete disaster. In fact, we got the Philly Fed Manufacturing Index later in the week. This was supposed to be -6.7. It came out at -1.6. And the prior month (which was originally reported as -10.5) was revised to -12.8.”
Peter is referring to the Philadelphia Fed Manufacturing Index, which tracks changes in business activities like how many people are hired, the rate of new orders, and the prices businesses are paying and receiving for goods.
A negative reading indicates contraction.
January’s readings were dark:
This is the fifth consecutive month where this index has been negative but it’s been negative for 18 out of the past 20 months. This is a massive manufacturing recession.”
The sector is struggling far from its touted renaissance.
And it’s not just the Philly data that shows this.
The NY Empire State Manufacturing Index plunged to -43.7 in January 2024.
This is like the worst number since the COVID lockdowns. I think back to back we have the biggest two-month decline in the history of the Empire State Manufacturing Index.”
The housing market is also looking gloomy.
Despite lower mortgage rates, existing home sales are declining:
Existing home sales actually fell in the month of December, which would surprise people because mortgage rates backed off quite a bit as a result of the decline in treasury yields. Yet despite that relief on the mortgage front, existing home sales, (which is most of the sales)… went down. In fact, month over month it was down 1%.”
Homes aren’t selling because people (and banks) can’t afford the high-interest rate mortgages, even though they have come down:
The people who want to buy them can’t afford to buy them because they can’t get those rock-bottom mortgage rates. Even though mortgage rates have come down, they’re still not low enough for them to afford the prices that the existing homeowners want.”
At the same time, existing homes aren’t selling. The people who are in them have low mortgages and aren’t motivated to sell. As economic conditions worsen, people will have to seek other means to get by on their mortgage.
They’ll rent out their homes so they can hang on to the mortgage. This is more of a sign of just how bad the economy is. And it’s going to get a lot worse.”
