The Obama Manufacturing Fairy Tale

Posted: Sep 02, 2011 12:01 AM

Understand this: The ISM (Institute for Supply Management number is a bastion of certitude.

It will always be above 50% for as long as the eye can see.  Whether it's above 50 or not.

As a matter of fact, since the so-called incredible Obama economic recovery, manufacturing activity has expanded, or been above 50%, for 25 straight months. 

Therefore, when a consensus of expert economists (guys from out of town carrying briefcases) called for a read of 48.8% for the month of August, I’m sure the White House was stunned, forcing them to take immediate action.

That means they probably made a few phone calls to see what could be done to wiggle the numbers. That's the kind of policy decisions one can take when they have the power of the Department of Justice behind them.

Don't believe me? Ask S&P and Moody's.   

However, the consensus estimate that manufacturing was soft should have come as no surprise after a disastrous Philly Fed manufacturing index report of +3.2% to -30.7%. 

After all, the Philly Fed report confirmed the dramatic plunge in the Empire State manufacturing report of -3.76% to -7.72%. 

Everything, from new orders to general overall business activity, showed rapidly deteriorating conditions. 

It’s really quite simple for those of us who depend on information from the real world, not some jerry-rigged model. 

Without sales, there is no need for production. With no production (manufacturing) there is no need for employees.  With no need for employees there are no wages and no wage increases, and without that, no sales. 

It’s definitely an extremely vicious cycle. 

A breaking of the 50% line, as easy as the French Maginot line was broken by Germany in 1940, should have been news that sent shockwaves through the White House, Congress, Wall Street, and Main Street. 

But alas, as I stated (actually shouted) on my radio show the other day “no way they let this number break 50, it ain’t gonna happen!” 

Surprise, surprise. 

The ISM number showed the lowest reading in twenty-five months, coming in at a remarkable 50.6%.  Yes, the line held, and once again, the alleged Obama recovery can be touted, another month of expansion. 

This August ISM number gives support to the old story about the little boy who was asked two questions at school. 

First question: What does your daddy do for a living? 

The answer: He works for the Institute of Supply Management. 

Second question: What is 2+2?  The response: Hmmm, what do you need it to be? 

Thus, the fairy tale continues.    

John Ransom | Create Your Badge

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