(What’s Left of) Our Economy: As Trump Tariffs Continue, U.S. Manufacturing Growth Steams Along

Tags

aluminum, China, China tariffs, Federal Reserve, industrial production, inflation-adjusted growth, manufacturing, metals, metals tariffs, metals-using industries, steel, tariffs, Trade, trade war, {What's Left of) Our Economy

Claims keep getting made that President Trump’s tariffs-heavy trade policies have been hammering American manufacturing. (Here’s just one example from as recent as yesterday.) And government, economy-wide data keeps on coming out showing these claims to be complete bunkum.

Today it’s the Federal Reserve’s turn; its new industrial production report (covering December) make plain as day that metals-using manufacturing for the most part continues to out-perform the rest of manufacturing when it comes to inflation-adjusted output even though Trump metals are supposed to be crippling them with skyrocketing cost increases for key inputs. (As the latest producer price results made clear, almost none of that inflation per se can be detected, either.) And although the effects of the China tariffs are more difficult to unpack, what can be presented responsibly fails to reveal discernible damage since the first tranche was imposed.

Below are the numbers for manufacturing overall, and for industry’s main metals-using sectors. They show after-inflation output since April, since the steel and aluminum tariffs went into effect in late March. In addition to the April-through- December percentage changes, you can also see results through November as reported by the Fed last month, along with the revised through-November numbers, to provide a sense of the trends’ momentum. 

                                              old thru Nov       new thru Nov       thru Dec

overall manufacturing:        +0.80 percent       +0.94 percent  +2.02 percent

durables manufacturing:      +1.73 percent      +2.02 percent   +3.31 percent

fabricated metals products:  +1.61 percent      +1.94 percent   +2.05 percent

machinery:                           +5.11 percent      +5.55 percent    +4.93 percent

automotive:                          -1.46 percent       -1.32 percent    +3.36 percent

major appliances:                 -0.88 percent       -0.31 percent    +0.08 percent

aircraft and parts:                +3.27 percent      +5.29 percent     +6.80 percent

As you can see, the only category that’s experienced production growth problems has been the major appliance sector. February was the first full month during which these levies were in place, and since then, price-adjusted output has been off by 1.99 percent (versus a 3.93 percent improvement for manufacturing as a whole). But as the above table demonstrates, even they’ve been making a comeback lately. In cases like aerospace and automotive, the growth pace has quickened significantly, while in machinery, we see some growth fall-off.

Analyzing the impact of the China tariffs is tougher both because they started more recently (in early July), because they’ve been greatly expanded since then, and because Chinese inputs are used in and compete with such a huge number of domestically produced goods. Moreover, the government’s list of these levies uses a different industry classification system than the Fed uses for industrial production, and exact match-ups don’t abound.

So the below table, showing real output changes for some products tariff-ed since July, is a best guess, with the exception of farm machinery and equipment, and ball bearings. But more power to you if you see China tariff-related damage here.

overall manufacturing:                            +1.72 percent

aircraft engines and engine parts:           +5.42 percent

industrial heating equipment:                 +0.14 percent

oil and gas drilling platform parts:         +2.21 percent

farm machinery and equipment:             +3.29 percent

ball bearings:                                           -0.17 percent

“Tomorrow, tomorrow, I love ya, tomorrow. You’re always a day away!” is a well-known Broadway lyric. As the new Fed industrial production figures demonstrate, “tomorrow” is also the best hope for the tariff alarmists to show that the trade curbs are in anyway undermining the American economy on net.

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(What’s Left of) Our Economy: Can We (Finally) Start Deflating the Tariffs-Led Inflation Claims?

Tags

aluminum, China, China tariffs, inflation, metals, metals tariffs, metals-using industries, steel, tariffs, Trade, Trump, {What's Left of) Our Economy

Good luck to you if you’re looking for signs of tariffs-led inflation in yesterday’s U.S consumer price data from the Labor Department.

It’s not that goods that used tariff-ed products (either steel and aluminum, or inputs from China) or that are tariff-ed themselves (final products from China) haven’t become more expensive since the relevant levies were imposed. It’s that the prices of many goods completely unaffected by the tariffs have gone up as well – and in many cases, faster than those that have been affected by the trade curbs. So there’s no evidence that the tariffs themselves have had any notable impact.

In fact, these latest figures (bringing the story up through December) underscore how many forces and developments influence price changes.

A great example is provided by canned fruits and vegetables – presented below in the table showing price changes over various key periods of time (including for the post-March tariff period) for metals-using products. Their costs of course include the cost of either the aluminum or the type of steel used in their cans. When you look at the numbers for most of these time frames, it’s clear that the prices of these foods have risen faster than the overall rate of what’s called “core inflation” – the inflation rate minus the costs of food and energy, which are considered too volatile price-wise to yield an accurate understanding of what economists regard as the nation’s underlying, most fundamental, inflationary performance.

Interestingly, the prices for canned fruits and vegetables have increased much faster during these periods than the prices of food overall. So what’s driving the big price increases in these canned foods must be the cans, right – and presumably what they’re made of? Not if you look closely.

For the real problem is clearly vegetables. Both month-to-month and clearly for the entire year, fresh vegetable prices have soared. Largely as a result, the prices of canned vegetables have jumped unusually strongly, and significantly boosted the numbers for the overall canned fruits and vegetables category.  

The special role being played by vegetable prices is also clear from looking at the trends in food prices – which aren’t included in the core inflation number. Except for December, these prices have risen considerably more slowly than those prices in the core grouping, or in the economy as a whole. 

If you’re still skeptical, look at the price trends for several other food products that often come in cans – like beverages of all kinds, and soup. There’s simply no consistent pattern of their increasing faster than core inflation over any time period. 

Similarly, although the prices of metals-using auto parts have risen more robustly than core inflation, the prices of metals-using vehicles have risen much more weakly. In fact, from December, 2017 to December, 2018, they’ve fallen in absolute terms. So something, or somethings, other than metals prices and tariffs count for much more in the total prices of these goods.

                                     Nov.-Dec.       Since April        y/y April           y/y Dec.

core inflation:            0.21 percent   +1.39 percent   +2.12 percent   +2.22 percent

overall inflation:       -0.06 percent  +1.09 percent   +2.43 percent   +1.95 percent

food:                         +0.37 percent  +0.98 percent  +1.39 percent    +1.58 percent

fresh fruits & vegs:  +1.94 percent  +1.82 percent   -0.45 percent    +1.75 percent

fresh fruits:              +1.33 percent    -1.73 percent  +1.35 percent     -0.73 percent

fresh vegetables:      +2.63 percent   +6.05 percent   -2.53 percent    +4.63 percent

processed fruits        +0.67 percent    -0.64 percent   -0.59 percent    +0.87 percent

& vegs:

canned fruits            +1.48 percent    +0.99 percent   -0.07 percent    +3.12 percent

& vegs

canned fruits:           +1.44 percent    +1.39 percent   -1.50 percent    +2.29 percent

canned vegs:            +1.30 percent    +1.12 percent   +1.04 percent   +4.18 percent

soups:                      +2.49 percent    +2.28 percent     -0.54 percent   -1.43 percent

malt beverages         -0.04 percent    +1.82 percent    +0.84 percent   +1.87 percent

consumed at home

alcoholic bevs          -0.04 percent     +1.34 percent    +2.17 percent   +2.25 percent

consumed away

juices & non-         + 0.13 percent     +1.77 percent     -0.25 percent  +2.51 percent

alcoholic drinks

carbonated drinks:  +0.41 percent     +3.01 percent     +0.03 percent  +4.07 percent

non-frozen, non-     +0.18 percent    +1.37 percent       -0.53 percent  +1.46 percent

carbonated non-

alcoholic drinks

new cars & trucks:        0 percent     +0.78 percent      -1.62 percent    -0.24 percent

auto parts:              +0.42 percent     +1.58 percent      -0.74 percent   +2.20 percent

Tariffs on goods from China have been in effect for fewer months than the metals tariffs. And since July, they’ve been imposed in phases, which were followed by a decision by President Trump to delay increases in a big tranche as part of the latest cease-fire in the trade conflict with China. So the data is less definitive. But thus far, at least, the prices of the goods below – which represent some of the main imports from China subjected to tariffs by the first rounds of these levies, which were imposed in July – have mainly rising more slowly than the rest of core inflation sectors. (The sportswear numbers are dicey, since such apparel is not broken out from the rest of the category as such. So the figures below represent results from a women’s apparel category that includes sportswear.)

                             Nov.-Dec.          Since Aug.        Aug. y/y           Dec. y/y

core inflation:   +0.21 percent   +0.73 percent    +2.19 percent   +2.22 percent

furniture:          +0.55 percent   +0.90 percent     -0.66 percent   +1.68 percent

auto parts:        +0.42 percent   +0.82 percent    +0.39 percent    +2.20 percent

tires:                 +0.98 percent  +1.50 percent      -1.64 percent    +1.29 percent

appliances:       -0.33 percent   +1.25 percent     +2.31 percent    +4.74 percent

sportswear:       -0.89 percent   -2.14 percent       -0.86 percent    -1.33 percent

As for appliances, their out-performance is due largely to a separate set of tariffs imposed on large household laundry equipment starting in February. As shown below, however, even in this case, price increases are starting to moderate. That’s clear from the decline in the year-on-year figure between February and December, and from very slow price increase recorded between November and December.

                                 Nov.-Dec.        Since Feb.          Feb. y/y           Dec. y/y

core inflation:       +0.21 percent   +1.67 percent   +1.86 percent   +2.22 percent

appliances:            -0.33 percent   +3.41 percent   +0.25 percent   +4.74 percent

major appliances: +0.19 percent  +11.59 percent   -4.22 percent   +9.02 percent

I know that I may be starting to sound like a broken record on the (negligible) impact of tariffs on the American economy so far. But until globalization cheerleaders in politics and business, and their mouthpieces in the Mainstream Media, start telling the story accurately, I’ll keep correcting the record.

(What’s Left of) Our Economy: New U.S. Jobs Report Delivers (Another) Face Slap to Trump’s Trade Critics

Tags

China, durable goods, global supply chains, Jobs, manufacturing, metals, metals tariffs, metals-using industries, tariffs, trade war, Trump, {What's Left of) Our Economy

My deepest sympathies to the nation’s tariff fear-mongers, who keep insisting that President Trump’s levies on imports have been decimating America’s domestic manufacturing sector. This morning’s Labor Department report on the U.S. employment situation in December reveals that they’re still as pathetically wrong as ever.

Let’s start, as usual, with the impact of the President’s tariffs on steel and aluminum, which started to be imposed in April, and which allegedly have been hammering metals-using industries. This Trump decision is supposed to epitomize the folly of such protectionist policies in general, and metals tariffs in particular, since metals-using industries generate much more output than metals-producing indusries, and employ many more workers.

Yet has been the case since the onset of these levies, the data makes abundantly clear that the metals-using sectors generally have been outperforming not only the rest of manufacturing jobs-wise, but the private sector economy as a whole. Here are the numbers for April through the last three data months (keeping in mind that the November and December figures are both still preliminary):

                                                   thru October     thru November     thru December

entire private sector:                +0.99 percent      +1.13 percent      +1.37 percent

overall manufacturing:           + 0.99 percent      +1.20 percent      +1.45 percent

durable goods:                         +1.25 percent      +1.43 percent      +1.67 percent

fabricated metals products:     +1.33 percent      +1.30 percent      +1.75 percent

non-electrical machinery:       +1.66 percent      +1.90 percent       +2.20 percent

automotive vehicles & parts:  +0.73 percent      +0.58 percent      +0.77 percent

household appliances:             -1.25 percent       -1.41 percent        not available

aerospace products & parts:   +4.45 percent      +5.47 percent        not available

Notably, even in one major sector that’s been lagging – automotive – the pace of net new job creation has quickened a bit lately. And the industry that’s genuinely taken it on the employment chin – appliances – has been dealing both with a separate set of tariffs on large household laundry machines along with a major slump in the American housing sector.

The impact of the Trump administration’s wide-ranging China tariffs is tougher to identify, partly because they only began in July, and partly because Chinese inputs are found in so many manufacturing industries. But here are the data for sectors with extensive global supply chains that often pass through China:

                                                           July thru November     July thru December

entire private sector:                             +0.66 percent              +0.90 percent

overall manufacturing:                         +0.66 percent              +0.93 percent

chemicals:                                            +1.54 percent              +1.40 percent

non-electrical machinery:                    +0.66 percent              +0.96 percent

computer & electronics products:        +0.50 percent              +0.83 percent

automotive vehicles & parts:               +0.90 percent              +1.08 percent

With one exception – computer and electronics products – these globalized industries have outperformed, too. And even in that lagging sector, employment has been growing faster lately.

These results still don’t prove that President Trump was right in claiming that trade wars are “easy to win.” But they sure add to the evidence that, for the United States, they’re eminently winnable. And that the President’s critics are losing. 

(What’s Left of) Our Economy: New U.S. Manufacturing Production Data (Again) Mock Tariff Fear-Mongering

Tags

aluminum, China, durable goods, Federal Reserve, industrial production, inflation-adjusted output, manufacturing, metals, metals tariffs, metals-using industries, non-durable goods, steel, tariffs, Trade, {What's Left of) Our Economy

If you’re among the legions of tariff alarmists in America’s intertwined political, business, and media establishments, this morning’s industrial production report (for November) from the Federal Reserve turned out to be an especially cruel hoax. It’s overall results seem to reveal that President Trump’s levies on imports of steel, aluminum, and on products from China are (finally!) producing major economic data showing damage to domestic manufacturing in the form of inflation-adjusted output. But the critical details (once again) show absolutely noting of the kind.

Let’s start with the metals tariffs – which started to be imposed in late March – and the performance of industries that make heavy use of them. If the Trump tariffs are indeed going to bite, then you’d think that some evidence would be visible eight months later. But the new Fed data make clear that this evidence still hasn’t appeared. As with last month’s post on the industrial production statistics, I’m including small household appliances. I’m still increasingly convinced that they’re now so small and consequently use little in the way of steel and aluminum, they do incorporate lots of electronics – so in principle they reveal something about the China tariffs’ impact.

The data start with April (the first full month in which the metals tariffs were in place) and go through November. I’m presenting the previously reported and revised October results in order to provide a sense of the trends’ momentum. I’m also adding aircraft and parts, which I carelessly left out last month; therefore, the original October results aren’t available.

                                                    old thru Oct      new thru Oct         thru Nov

overall manufacturing:              +1.30 percent    +0.78 percent     +0.80 percent

durables manufacturing:           +1.93 percent    +1.55 percent     +1.73 percent

fabricated metals products:      +2.06 percent     +1.67 percent     +1.61 percent

machinery:                               +5.09 percent      +4.54 percent    +5.11 percent

automotive:                               -2.42 percent      -1.74 percent     -1.46 percent

small appliances:                      -6.62 percent       -8.10 percent   -10.86 percent

major appliances:                     -3.32 percent       -3.24 percent     -0.88 percent

aircraft & parts:                        not available       +3.54 percent    +3.27 percent

The good news for tariff alarmists is the overall real manufacturing growth slowdown apparent from this table, led by a significant downward revision for October. But look more closely and there’s no reason to blame the metals tariffs at all.

For if they were the main culprit, why would the slowdown be so much more modest in the durable goods sector – where so many of the biggest metals-using industries are found? Why would heavy metals-using machinery still be outperforming big-time? Why would another metals-reliant giant, automotive, be demonstrating such impressive catch-up? And how could the major appliances sector – which has also been hit with a product-specific tariff on large home laundry machines – be making up even more ground?

The details will also prove disappointing to China tariff alarmists. Starting in July, levies on $250 billion worth of imports from the People’s Republic. And so many U.S. domestically manufactured products contain parts and components and other inputs from China that it’s been easy to sell the contention that the higher prices for American industry resulting from the tariffs will backfire on the entire manufacturing sector.

Yet once more, the Fed industrial production data reveal these claims to be “truthy” (i.e, something that pushers want to believe is the case) rather than “true.” As noted last month, Chinese inputs are so widely used that I can’t perform a deep statistical dive for now. But the main manufacturing aggregates don’t bear out the “tariff-mageddon” story for the China levies, either.

As the numbers in the first table for smaller appliances indicate, there’s a case that they’ve been damaged by the China tariffs, since they surely use lots of Made in China electronic components. But the industrial production data writ large show nothing of the kind. The figures below show the changes in real output for manufacturing generally, and for its two main super-sectors, for the five months since the first China tariffs were imposed (during the first week of July) and for the five months to and including July.

                                                      March-July                       July-Nov

overall manufacturing:               +0.87 percent                 +0.52 percent

durable goods:                            +0.13 percent                 +2.01 percent

non-durable goods:                     +1.65 percent                  -0.99 percent

The obvious conclusion: Unless Chinese inputs are highly concentrated in the non-durable goods sector (and there’s no justification for this assumption), there’s a problem in non-durable goods stemming from something (or things) other than the China tariffs.  ‘

Luckily for the tariff alarmists, however, there’s no sign that they’ll be held accountable by the institution that’s supposed to be democracy’s watchdog:  the Mainstream Media.  So for the foreseeable future, in terms of what the public will be reading and hearing on trade policy, expect gloom to keep springing eternal. 

(What’s Left of) Our Economy: Today’s Jobs Data Once More Refutes Tariff Alarmism

Tags

aluminum, China, Jobs, manufacturing, metals tariffs, metals-using industries, private sector, steel, tariffs, Trade, Trump, {What's Left of) Our Economy

As usual with these releases lately, the newest U.S. monthly jobs report (for November) contains lots of valuable information about the impact of President Trump’s tariff-centric policy on the domestic economy. And as usual, this morning’s findings provide ample evidence that manufacturing sectors widely reported to be either currently hurting or likely to be damaged by levies either on imports of steel and aluminum, or products from China, are actually outperforming the rest of industry and even the rest of the entire economy.

Let’s begin with manufacturing industries that make heavy use of metals as inputs, and that have often been portrayed as major victims of the Trump metals tariffs. Here are the changes in their payrolls since April – i.e., the months since those tariffs began to be imposed in late March. For comparison’s sake, the table also includes the employment results for the entire private sector, and for manufacturing as a whole.

                                              thru September     thru October       thru November

entire private sector:             +0.77 percent      +1.11 percent       +1.10 percent

overall manufacturing:        + 0.76 percent      +0.96 percent       +1.18 percent

durable goods:                      +1.01 percent      +1.21 percent       +1.40 percent

fabricated metals products:  +1.16 percent      +1.12 percent       +1.01 percent

non-electrical machinery:    +1.39 percent      +1.68 percent       +1.85 percent

automotive vehicles & parts: +0.08 percent    +0.73 percent       +0.64 percent

household appliances:            -0.31 percent     -1.10 percent         not available

aerospace products & parts: +3.75 percent      +4.43 percent        not available

Once again, the heavy metals-users generally have been performing well. Household appliances and the automotive sector seem to be the noteworthy laggards. But the former have also been hit by a separate set of tariffs on large household laundry machines as well as a slump in the nation’s housing sector. And most analysts believe that U.S. auto sales have recently peaked because of that market’s individual dynamics and cycles.

Supporting this analysis: The strong performance of other big metals-using industries, like aerospace and non-electrical machinery – which underscores what should be the obvious reality that numerous developments and forces influence employment trends in any given part of the economy.

The only possible area of concern is fabricated metals products, where jobs are still increasing, but where the pace of employment creation has slowed to some degree.

It’s tougher to judge definitively the impact of President Trump’s tariffs on imports from China both because they haven’t been in place for as long as the metals duties, and because they entail such a large number of goods. But given those caveats, it’s still tough to see anywhere in the jobs data support for the conviction that these tariffs either are backfiring badly on American industry or will do so because U.S. domestic manufacturers rely so extensively on so many Chinese-made parts, components, and materials.

If you’re skeptical, take a look at the job-creation records of key American industries with extensive global supply chains – including many Chinese links. This table starts in July, because the initial tranche of China tariffs was imposed during the first week of that month. And again, for comparison’s sake, it includes the economy’s entire private sector:

July through November

entire private sector:                        +0.63 percent

overall manufacturing                     +0.65 percent

chemicals:                                       +1.62 percent

non-electrical machinery:               +0.61 percent

computer & electronics products:   +0.47 percent

automotive vehicles & parts:          +0.96 percent

non-electrical machinery:               +0.61 percent

Judging the China’s tariffs’ real impact will of course become even tougher for the time being, given the 90-day trade truce just agreed to by Washington and Beijing, which may reduce domestic companies’ uncertainty as to the wisdom of continuing business-as-usual with China – or may not. So far, however, claims of widespread or even likely economic harm stemming from this bilateral trade war look as deserving of urban legend status as this year’s metals tariffs alarmism.

(What’s Left of) Our Economy: New Fed Manufacturing Figures Mock Tariff-Mageddon Claims

Tags

aluminum, aluminum tariffs, appliances, automotive, China, China tariffs, durable goods, Federal Reserve, manufacturing, manufacturing production, metals, metals-using industries, non-durable goods, steel, steel tariffs, tariffs, Trade, Trump, {What's Left of) Our Economy

With this morning’s release of the Federal Reserve’s new real manufacturing output figures, we just got more data indicating both the impact of President Trump’s metals tariffs and his China levies. And, as with other manufacturing numbers, like employment statistics, the Fed output release mocks widespread claims that both kinds of trade curbs are already undermining U.S. domestic industry.

Here are the results for major metals-using sectors – with one caveat. Because it includes many goods so diminutive and stuffed with electronics that they’re clearly no longer using much steel or aluminum (unlike the large appliances), placing the small household appliances category on this list seems to have been mistaken all along. But I’m leaving them on so you can make up your own mind. The data start with April (because the first metals tariffs were imposed in late March) and go through October (the latest month covered by this Fed series). And I’m presenting the previously reported and revised September results in order to provide a sense of the trends’ momentum.

                                              old through Sept   new through Sept   through Oct

overall manufacturing:           +0.76 percent        +0.98 percent     +1.30 percent

durables manufacturing:        +1.41 percent       +1.46 percent      +1.93 percent

fabricated metals products:    +1.28 percent       +1.83 percent      +2.06 percent

machinery:                             +2.84 percent       +3.80 percent      +5.09 percent

automotive:                            +1.39 percent       +0.35 percent       -2.42 percent

small appliances:                    -1.23 percent        -3.67 percent        -6.62 percent

major appliances                    -0.87 percent        -0.99 percent        -3.32 percent

Superficially, the picture is somewhat mixed. But as I just said, in my view, the small appliances category should be ignored. Accelerating deterioration clearly characterizes the major appliances sector, but do tariffs (which include not only the metals levies but separate tariffs on household laundry machines that result from a trade law case initiated during the Obama years) deserve most of the blame? Maybe not, considering that the domestic housing sector – a big generator of major appliance sales – is in the middle of a noteworthy slowdown.

Momentum is clearly weakening in the automotive sector as well (where even the seasonally adjusted monthly Fed production numbers are notoriously volatile and subject to significant revisions). But it’s likely that sagging output is reflecting sales that are sagging overwhelmingly because of the industry’s own cyclical dynamics.

Indeed, these industry-specific developments look all the stronger considering that two other major metals-using sectors – fabricated metals products and non-electrical machinery – are gaining production momentum. So something other than the price of metals must be kneecapping the laggard sectors.

The new Fed data also shed noteworthy light on the impact of the President’s China tariffs. Levies on a total of $50 billion worth of goods began in July, and tariffs on $200 billion more worth of merchandise imports were imposed in September. So many products have been tariff-ed, and the lists contain so many producer as well as consumer goods, that even a genuinely deep dive into the data might not yield firm conclusions.

But here’s what we know from the 30,000-foot level about after-inflation domestic manufacturing output during the three months preceding the first China tariffs, and the three months following them:

                                             April-July                            July-Oct

overall manufacturing:     +0.29 percent                     +1.02 percent

durable goodsL                 -0.28 percent                      +2.22 percent

non-durable goods:          +0.87 percent                      -0.21 percent

Good luck finding much China damage on net from these numbers.

Back in the 18^th century, Jonathan Swift lamented that “Falsehood flies, and the truth comes limping after it.” Will Mainstream Media coverage of the industrial production figures and Trump tariffs prove him right once again?

(What’s Left of) Our Economy: Tariff-Led U.S. Inflation Remains Mythical

Tags

aluminum, appliances, beer, cans, Emily Rauhala, inflation, Labor Department, laundry equipment, metals, metals-using industries, Producer Price Index, steel, tariffs, Trade, Trump, Washington Post, wholesale prices, {What's Left of) Our Economy

Talk about bad timing! Yesterday, the Washington Post ran a piece by Emily Rauhala, who covers Canada and other foreign news for the paper, on how soaring tariff-juiced aluminum prices are already “bruising” the American beer industry. According to her report, “In a vivid example of how Trump’s trade tactics abroad can hurt business at home, the U.S. beer industry, which needs aluminum to make cans, is seeing costs rise.”

But this morning, the U.S. Labor Department came out with data showing that, although prices for aluminum (along with steel, another tariff-ed metal) have jumped from last October to this past October, they’re now actually starting to fall. And special bonus! The same trend seems to be holding for household laundry equipment.  Product-specific tariffs boosted prices for a time, and generated big headlines, but now the price are falling back to earth.

The new Producer Price Index (which measures price changes at the wholesale level) reports that “aluminum mill shapes” last month cost buyers 8.2 percent more than they did in October, 2017. But since July, they’ve dropped on a monthly basis by 2.1 percent, 0.3 percent, and 0.4 percent.

Further, it’s important to remember that, as with steel and the laundry machines, last year’s prices were artificially depressed by foreign dumping. In other words, these prices were set by foreign governments determined to grab market share for their producers at the expense of their American-based rivals. They had nothing whatever to do with market forces.

The statistics for “steel mill products”? Between October, 2017 and October, 2018, prices did indeed surge by 18.2 percent. But the monthly numbers since July reveal price changes of +2.6 percent, zero percent, and -0.8 percent.

Also significant: In lots of metals-using industries, there are no major year-on-year price increases at all. These include hardware, plumbing fixtures, turned products (like bolts and nuts and screws), metal valves, ball bearings, auto parts, aircraft parts, and aircraft engines and parts (which are tracked separately).

The price data for household appliances are found in a another of today’s Labor Department tables, and don’t separate out laundry equipment from other appliances where no special tariffs were applied. But they strongly indicate that any producers thinking they’d gain major pricing power from these levies were utterly delusional.

From October, 2017 through last month, prices in this category were up only 3.3 percent. And the last three months’ worth of sequential changes? Down 0.1 percent, up 1.3 percent, and down 0.7 percent. Think we’ll see this development  generate any headlines?

As with investing, past performance doesn’t always predict future results. But it’s not bupkis, either. At some point, President Trump’s tariffs may indeed supercharge U.S. inflation. To date, however, trade-related inflation reports at best deserve the warning, “Let the buyer beware.”

(What’s Left of) Our Economy: “Tariff Victim” US Industries Remain Full of Job Openings

Tags

business, China, durable goods, employers, job openings, Jobs, JOLTS, labor shortages, manufacturing, metals tariffs, metals-using industries, private sector, quits, tariffs, Trade, Trump, workers, {What's Left of) Our Economy

If today’s government data on U.S. jobs openings don’t prompt loud mea culpas and apologies from the tariff-alarmists in the Mainstream Media and elsewhere in America’s globalization cheerleading establishment, I don’t know what will.

Recall that Americans have been swamped in recent months with reports that President Trump’s trade curbs have already been decimating American manufacturing.  And since they have been in place the longest, his metals tariffs (on most steel and aluminum imports) have been treated as prime examples, with metals-using industries being the prime victims.

But the new figures on job openings in major sectors of the economy (contained in the latest monthly release of the “JOLTS” numbers – the “job openings and labor turnover series”) are simply the latest statistics thoroughly debunking these claims.

Here are the results for job openings from April (because the metals tariffs began to be imposed in late March) through September (the most recent month covered by the JOLTS reports):

private sector:     +2.30 percent

manufacturing:   +7.08 percent

durable goods:   +7.47 percent

As has been the case with so much other data, the durable goods super-sector of manufacturing – the portion of industry containing the biggest metals-using industries – outperformed the rest of manufacturing and the entire economy in the number of employment opportunities it claimed were available.

And although the number of job openings in durable goods dipped from August to September (whose figures are still preliminary), they fell much less than in the rest of the economy.

private sector:     -2.85 percent

manufacturing     -4.72 percent

durable goods     -0.66 percent

Moreover, the 302,000 durable goods jobs openings reported preliminarily in September were the second largest number on record (going back to late 2000). The all-time high? August’s 304,000.

Some critics maintain that employers have incentives to exaggerate their claims of job vacancies. The motives cited include reinforcing contentions of “skills gaps” and other forms of labor shortages; rationalizing the persistence of high unemployment rates or sluggish wage growth; and pushing government or schools to take on worker training responsibilities (and expenses) that employers are loathe to assume. It’s also easy to see how exaggerated job openings claims can be used to bolster arguments for more immigration – which of course is also a tempting strategy for keeping wages down by increasing labor supply relative to demand.

But even if such exaggeration is rife, why would it be so much more important in durable goods manufacturing than in the rest of the economy? Further, why would employers have any reason to overstate the number of vacancies they’re trying to fill if they believed that their businesses were being swamped by steep, tariffs-led costs increases, or were about to? Wouldn’t they be trying to shed payroll instead? As a result, it’s hard to escape the conclusion that the JOLTS openings numbers simply add to the evidence that, despite the claims of actual or impending tariffs-mageddon, metals-using industries continue to be faring just fine.

Interestingly, workers in durable goods sectors don’t appear to share this optimism fully, according to the JOLTS data. For the figures also measure the numbers of employees voluntarily leaving their jobs – a clear sign of confidence that lots of new opportunities are available. Here are are the April-through-September results:

private sector:     +8.53 percent

manufacturing:    -2.94 percent

durable goods:     -9.48 percent

Clearly, durable goods workers have been displaying less confidence about reemployment opportunities than their counterparts in the rest of manufacturing, and much less than private sector workers overall. And these results are mirrored in the August-to-September numbers:

private sector:     -1.26 percent

manufacturing:    -6.60 percent

durable goods:   -11.76 percent

Nonetheless, in absolute terms, all these quits levels – even for durable goods – remain pretty high by recent standards. And for durables, they’re somewhat volatile, possibly because the absolute numbers have always been on the small side. Indeed, durable goods quits increased by 6.19 percent month-to-month as recently as July. And the August-to-September drop-off was the biggest sequential decline in percentage terms since the 15.70 percent monthly nosedive in August, 2017 – after which the numbers of quits steadily recovered.

As always, these trends could change (or, with the quits rate) intensify. It’s also possible that the President’s more sweeping tariffs on imports from China will be game-changers. (The first round dates only from early July, and the second, much larger round, went into effect in mid-September.) For now, however, the only real news about the economic effect of these levies is that they’ve showed no signs of slowing the recovery’s current momentum. Accept no substitutes.

(What’s Left of) Our Economy: More Terrible Data for…the Metals Tariffs Alarmists

Tags

aluminum, durable goods, Jobs, manufacturing, metals tariffs, metals-using industries, Peanuts, Samuel Beckett, steel, tariffs, Trade, Trump, Waiting for Godot, {What's Left of) Our Economy

Remember Waiting for Godot? For those who haven’t read it, in a (very superficial) nutshell, Samuel Beckett’s 1953 existentialist masterpiece tells the story of two men who keep waiting for someone who never comes despite promises of his arrival that keep getting proved wrong. Think of the play as a world-class literary and philosophical version of the running Peanuts gag involving Lucy holding the football for a Charlie Brown place-kick.

Both Godot and Peanuts came to mind instantly this morning once I digested the new U.S. manufacturing jobs figures (for October). For as has been the case since late March, when President Trump began in imposing tariffs on metals imports, the job-creation performance of American metals-using industries once again defied the doomsayers by generally outperforming job-creation in the rest of domestic manufacturing, and in the U.S. private sector as a whole.

Here are the detailed numbers for October and September (which are still preliminary) and for August (which are now final – until the next major revision):

                                        through August     through September     through October

entire private sector:        +0.68 percent          +0.77 percent           +0.97 percent

overall manufacturing:     +0.61 percent          +0.75 percent           +0.82 percent

durable goods:                  +0.82 percent         +1.00 percent            +1.27 percent

fabricated metals products: +1.09 percent      +1.16 percent             +1.16 percent

non-electrical machinery:   +1.23 percent       +1.37 percent            +1.80 percent

automotive vehicles & parts: -0.03 percent     +0.07 percent            +0.78 percent

household appliances:          -0.31 percent        -0.31 percent             not available

aerospace products & parts:  +3.12 percent    +3.71 percent              not available

Consistent with data for the preceding months, the results are somewhat uneven. The automotive and appliances sectors have been under-performing considerably. (The latter, of course, was hit with household laundry machine tariffs a little before the metals tariffs began.) And momentum is slowing in fabricated metals products. But the rate of payroll increases everywhere else keep exceeding those for manufacturing overall, and even the durable goods super-sector – where the metals use in manufacturing is heavily concentrated. In addition, the momentum for motor vehicles and parts is strengthening.

Nothing in economics lasts forever. But the Cassandras who have been claiming both that the metals tariffs will surely decimate American metals-using industries, and that the damage is already visible, clearly need to rethink their narratives. Because with each passing month, they look just as clueless as Vladimir, Estragon…and good old Charlie Brown.

(What’s Left of) Our Economy: Despite Tariff Alarmism, “Victim Industries'” Manufacturing Output Remains Strong

Tags

China, Federal Reserve, industrial production, inflation-adjusted output, manufacturing, metals-using industries, tariffs, Trump, {What's Left of) Our Economy

The Federal Reserve’s new (September) industrial production figures contained the latest evidence that President Trump’s metals tariffs are showing no sign of harming America’s metals-using industries. Indeed, on top of their inflation-adjusted output generally remaining impressive compared with that of the rest of domestic manufacturing, industries that had apparently paid a high price for the levies (chiefly major appliances, where separate safeguard tariffs on household laundry equipment have been in place since February) have made up lost ground dramatically.

Moreover, although they began only in July, the industrial production figures so far show no reason to believe that Mr. Trump’s China tariffs are undermining domestic industry, either.

Here’s how major metals-using industries have done in terms of generating real growth between August and September (according to this morning’s preliminary data) – along with the numbers for manufacturing as a whole, and durable goods as a whole (the super-category in which the heaviest metals users tend to be found). This table also includes the previously released and new July-August results.

                                            Old July-Aug       New July-Aug           Aug-Sept

overall manufacturing:       +0.28 percent       +0.29 percent         +0.24 percent

durable goods:                  +1.01 percent         +1.08 percent         +0.59 percent

fabricated metals products: +0.22 percent       +0.51 percent        +0.05 percent

machinery:                          +1.07 percent       +1.87 percent        +0.88 percent

automotive:                         +4.02 percent       +4.27 percent        +1.70 percent

small appliances:                 +0.81 percent      +1.98 percent        +1.34 percent

major appliances:                 -2.76 percent        -1.58 percent        +3.26 percent

As with domestic manufacturing as a whole, the metals-users experienced a sequential production slowdown in September – and in fact one that exceeded that for manufacturing overall. But this slowdown came right after a July-August performance that was much stronger than for the rest of industry, and where revisions were much more positive.

The longer-term statistics tell much the same story – including about a big comeback for appliance production. Here are the real output data since April (used as the baseline since the metals tariffs were imposed beginning in late March):

                                               old thru Aug       new thru Aug       thru Sept

overall manufacturing:          0.54 percent       +0.52 percent    +0.76 percent

durables manufacturing:     +0.48 percent       +0.82 percent    +1.41 percent

fabricated metals products: +0.79 percent       +1.22 percent    +1.28 percent

machinery:                           +0.09 percent      +1.93 percent    +2.84 percent

automotive:                         -0.63 percent        -0.30 percent    +1.39 percent

small appliances:                 -5.33 percent        -2.54 percent     -1.23 percent

major appliances”                -5.25 percent        -4.00 percent     -0.87 percent

Finally, although the China tariffs are much more recent, reports are already appearing claiming that they, too, are backfiring on American industry. Yet just as with the metals tariffs, the official data refute these claims. Here are the real output figures for manufacturing as a whole, and its two super-sectors, for the two months preceding the first tariffs on imports from China and for the two months following them:

                                                         May-July                             July-Sept

overall manufacturing:                 +1.15 percent                      +0.54 percent

durable goods:                              +1.28 percent                      +1.68 percent

non-durable goods:                       +1.01 percent                       -0.63 percent

True, a slowdown is apparent. But it’s entirely due to weak performance in the non-durable goods sector. And it’s likely that this setback owes at least partly to Hurricane Florence, since among the worst results were those in the textiles sector, which boasts a large presence in the Southeastern United States.

As always, the data going forward could change the tariff-impact picture significantly. It will need to for the narrative to start finally matching up with the reality.