Mish's Global Economic Trend Analysis

Capital Controls Destroy Greek Small Businesses; Bank Shares Plunge Again; Record Contraction
More on Ukraine's "Right Sector" Movement
Factory Orders Rise 2nd Time in 11 Months, Led by Aircraft; The "Bounce" in Five Pictures
3D Printing an Ornate Bridge Over a Water in Amsterdam

Capital Controls Destroy Greek Small Businesses; Bank Shares Plunge Again; Record Contraction

Posted: 04 Aug 2015 05:16 PM PDT

Record Manufacturing Contraction

Greece may as well have gone to hell in a handbasket. Carnage is everywhere one looks, but let's start with the Markit Greece PMI report that shows record manufacturing contraction.

July saw factory production in Greece contract sharply amid an unprecedented drop in new orders and difficulties in purchasing raw materials. The headline seasonally adjusted Markit Greece Manufacturing Purchasing Managers' Index® registered 30.2, well below the neutral 50.0 mark and its lowest ever reading.

Record contractions were registered for almost all variables monitored by the survey, including output, new orders, employment and stocks. There was also a record lengthening in suppliers' delivery times.

July's sharp decrease in the level of new business at manufacturers surpassed the previous record set in February 2012. Panel members commented on the impact of capital controls on demand, and also cited a generally uncertain operating environment which further weighed on sales. A sharp and accelerated decrease in new export orders (also a series record) added to the overall reduction in new work.

July's survey signalled the steepest drop in factory employment ever recorded during the 16-plus years of data collection. The decrease was the fourth in successive months, following marginal job losses throughout the second quarter of the year.

A lack of availability of supplies meanwhile contributed to a rise in average purchase prices, with the rate of cost inflation accelerating from the previous month to the second-fastest since September 2012.

In contrast, prices charged by manufacturers for goods decreased to the greatest extent for over two years, the rate of decline notably more marked than the moderate pace of deflation recorded during the month before.

Greece Manufacturing PMI

Businesses Gasp Over Capital Controls

The Financial Times reports Greek Businesses Left Gasping as Capital Controls Bite.

"Good and healthy companies that survived the crisis have been rendered helpless because they can't import raw materials," said Constantine Michalos, president of the Athens Chamber of Commerce and Industry.

As frustration mounts, the Piraeus port in Athens has become a maritime parking lot to about 8,000 shipping containers waiting for importers who cannot yet pay the outstanding bills on their shipments.

Rena Simou, a clothing retailer who operates outlets on several popular tourist islands, said her business is headed for collapse if she cannot deliver stock before mid-August when the summer tourist season begins to wind down.

"My boxes are waiting in customs but I can't send the rest of the money from my Greek account. It's a business disaster," she said. "If the controls aren't lifted soon retailers like me will become like east Europeans in the 1990s . . . We'll be suitcase traders."

Question for Rena

Why did you have a Greek bank account? The smart money got out long ago.

I'm not blaming people for being dumb. Rather, I simply point out that being economically illiterate has its consequences. Those lowest on the totem pole will take the hardest hit.

And the bailout?

No one but creditors have been bailed out. The average person on the street has been brutalized.

When the carnage appears to be over, those who were smart enough to get the hell out, will have plenty of money to come back in and purchase bankrupt businesses and properties at rock-bottom prices.

Market Reopens Shares Plunge

The stock market collapsed yesterday following its restricted reopening.

On Monday Greek Bank Shares Crash 30% as Market Reopens.

Shares in Greek banks crashed 30% Monday as trading resumed on the Athens stock exchange for the first time since the country was nearly forced to abandon the euro last month.

The benchmark index in Athens opened nearly 23% lower, with banking stocks the biggest losers. The country's four biggest lenders -- Piraeus (BPIRF), Alpha Bank (ALBKF), the National Bank of Greece (NBG) and Eurobank all plunged 30% -- the daily limit -- immediately after the open.

Stocks in other sectors recovered slightly during the session but the index still shed more than 16% by the close.

Bank Shares Plunge Again

Today, Bank Shares Hammered Again.

Capital controls will destroy what's left of Greece.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

More on Ukraine's "Right Sector" Movement

Posted: 04 Aug 2015 12:36 PM PDT

In response to Ukraine's Ultra-Right Militia Threatens Military Coup, I received an email from Jacob Dreizin on statements made by the Financial Times that I quoted.

Jacob writes ...

Hello Mish,

The FT was inexcusably sloppy in its writing. Here's a quick clarification.

The Right Sector is not a battalion, nor do they call themselves one. A battalion is at most 300 men in a compact location, whereas Right Sector has thousands of members across Ukraine.
The Right Sector is more like a "movement", almost a political party, albeit with guns and some for-profit criminal operations.
The FT confuses Right Sector with a number of smaller, battalion or regiment-sized groups operating in the occupied parts of the Donbass, some of whom are openly Nazi in orientation.

Despite the threats, the Right Sector is not capable of a coup. It was humiliated in Transcarpathia last month, when it attacked the local mafia over a business dispute, then had to run and hide once the military showed up.

Its threat to launch protests in Kiev fizzled after only a few hundred showed up. After this sad performance, its leaders have had to talk of a coup/revolution in order to save face.

However, it has succeeded in making Poroshenko look even more ineffectual in the eyes of the Western media and perhaps Western governments as well. In that sense, the group is a real threat to Kiev.

Jacob

More Questions Than Answers

Jacob's comments shed some needed light on Ukraine, but in doing so, created another series of questions.

Whether or not the "movement", as Jacob accurately calls it, is technically capable of a coup may not matter. Might some rogue members try anyway? Alternatively, instead of a coup, might they simply opt to take out Poroshenko and see what happens next?

Kiev was willing to tolerate the Right Sector because its troops took the side of Kiev against the separatists.

However, by calling for a nationwide no-confidence referendum on president Petro Poroshenko, followed up with threats of a coup (idle or not), the movement has created a huge problem for the president.

Another Simmering Pot

Can Poroshenko make the Right Sector an officially recognized unit of the regular army as they demand, even though they call for Poroshenko's removal by force? Should Poroshenko ban them? Ignore them?

Meanwhile, the pot simmers. Attempts by the government to put a lid on the pot could cause it to explosively boil over.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

Factory Orders Rise 2nd Time in 11 Months, Led by Aircraft; The "Bounce" in Five Pictures

Posted: 04 Aug 2015 10:50 AM PDT

Factory orders rose for only the second time in eleven months, in line with the Consensus Estimate.

Factory orders rose nearly as expected in June, up 1.8 percent for only the second gain in the last 11 months. The durable goods component, initially released last week, is unrevised at plus 3.4 percent in a gain distorted by aircraft orders but one that does reflect a pop higher for capital goods. The non-durables component, data released with today's report, rose 0.4 percent on order gains for oil and chemicals.

Orders for civilian aircraft jumped 65 percent in the month following, in routine up-and-down fashion for this component, a 32 percent downswing in May. Industries reporting respectable gains include 0.5 percent for furniture and 0.6 percent for motor vehicles as well as a 1.5 percent gain for machinery. Orders for energy equipment bounced back 5.5 percent after sinking 25 percent in May. Year-on-year, energy equipment is down 51 percent.

Looking at totals again, shipments rose a very solid 0.5 percent with shipments of core capital goods up 0.3 percent. The latter, which is a key reading that excludes aircraft, isn't spectacular but is still a solid gain for business investment. Unfilled orders, which have been in contraction most of the year, were unchanged in June. Inventories rose 0.6 percent in a build that falls in line with shipments, keeping the inventory-to-shipments ratio at a manageable 1.35.

Chart Perspective On the Bounce

This was a decent but not spectacular report and only the second in nearly a year. A chart of new orders and shipments provides a good perspective.

Here are a few more charts from Fred, all showing notable weakness on a year-over-year basis.

Durable Goods New Orders

Export New Orders Excluding Motor Vehicles

New Orders for Nondurable Goods

New Orders Excluding Transportation

Year-over-year new orders were down once again, in many ways.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

3D Printing an Ornate Bridge Over a Water in Amsterdam

Posted: 04 Aug 2015 12:46 AM PDT

Every month, 3D printing possibilities get increasingly elaborate.

For example (with thanks to reader Tim Wallace for the links): The Goal of MX3D is to 3D print a steel bridge. Really.

With our robots that can "draw" steel structures in 3D, we will print a bridge over water in the center of Amsterdam. We research and develop groundbreaking, cost-effective robotic technology with which we can 3D print beautiful, functional objects in almost any form. The ultimate test? Printing an intricate, ornate metal bridge for a special location to show what our robots and software, engineers, craftsmen and designers can do.

The bridge will be designed by Joris Laarman. That process using new Autodesk software will be a research project in itself. It will sync with the technical development and take into account the location. The project is a collaboration between MX3D, design software company Autodesk, construction company Heijmans and many others.

From September 2015 the progress of the project can be followed in our visitor center. MX3D and the City of Amsterdam will announce the exact location of the bridge soon.

MX3D's engineers, craftsmen and software experts bring together digital technology, robotics and traditional industrial production in the MX3D Bridge project; they research the construction site of the future, test and share their knowledge within an AMS-3D Building FieldLab.

Conceptual Design

Tim Geurtjens, CTO MX3D:

"What distinguishes our technology from traditional 3D printing methods is that we work according to the 'Printing Outside the box' principle. By printing with 6-axis industrial robots, we are no longer limited to a square box in which everything happens. Printing a functional, life-size bridge is of course the ideal way to showcase the endless possibilities of this technique."

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

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Mish's Global Economic Trend Analysis

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