Remember that initial estimate from Commerce of 1.5% annualized GDP growth rate for the second quarter? Expect a significant revision in the wrong direction later this month. The manufacturing sector declined in both orders and shipments in June, especially in the latter:
New orders for manufactured goods in June, down three of the last four months, decreased $2.1 billion or 0.5 percent to $465.8 billion, the U.S. Census Bureau reported today. This followed a 0.5 percent May increase. Excluding transportation, new orders decreased 1.8 percent. Shipments, down two of the last three months, decreased $5.3 billion or 1.1 percent to $469.9 billion. This followed a 0.3 percent May increase. Unfilled orders, up following two consecutive monthly decreases, increased $3.4 billion or 0.3 percent to $988.1 billion. This followed a slight May decrease. The unfilled orders-to-shipments ratio was 6.27, up from 6.24 in May. Inventories, also up following two consecutive monthly decreases, increased $0.4 billion or 0.1 percent to $605.4 billion. The inventories-to-shipments ratio was 1.29, up from 1.27.
The big hit came on non-durable goods, orders for which dropped 2.0% in June. Durable goods orders slightly declined by 0.1%, but transportation equipment took a big hit, with a 1.1% decline. Inventories increased thanks to the falling orders and shipments, especially for durable goods (0.4%). This is third month out of the last four showing a decline in demand and production.
Reuters breaks out the “U” word, and warns that this looks bad for any meaningful growth for the rest of the year:
New orders for U.S. factory goods unexpectedly fell in June, a fresh sign that the slowdown in the country’s manufacturing sector likely would stretch into the second half of the year. …
The trend in U.S. manufacturing has appeared softer and has added to concerns the economic recovery is losing steam. The decline in new orders in June likely means softer output down the road, which could weigh on economic growth.
Thursday’s report showed broad weakness across industries making everything from machinery and appliances to cars and electronics. New machinery orders dropped 2.1 percent and orders for motor vehicles and parts gave up 0.7.
The overall decline was tempered by a 14.2-percent increase in new orders for civilian aircraft. Outside transportation, orders were down 1.8 percent.
The warning is almost certainly correct, although it might be amusing to see whether Reuters uses a form of “unexpectedly” if its pessimistic prediction turns out to be true. We are seeing significant slowing now, more than the initial Q2 estimate of 1.5% indicated. Demand appears to be declining across the board, with the exception of civilian aircraft last month, and that suggests that we’re approaching a stall or worse in the US economy. That will be bad news for Barack Obama’s re-election prospects, and Jim Pethokoukis notes that the economic numbers already were predicting a loss:
Political scientist Douglas Hibbs looks at two factors when forecasting presidential elections: a) per capita real disposable personal income over the incumbent president’s term, and b) cumulative U.S. military fatalities in overseas conflicts.
And he’s predicting a near-landslide win for Mitt Romney over Barack Obama, with Obama losing by about as big a margin in 2012 as he won back in 2008. Under Hibbs Bread and Peace model, Romney wins 52.5% to Obama’s 47.5%.
If the growth rate gets closer to zero — or surpasses it — Obama may be lucky to get Jimmy Carter numbers in November.