Mish's Global Economic Trend Analysis

U.S. Satisfaction Falls to 13-Month Low
Wholesale Trade: Another Bad Report, Inventories Decline, Prior Month Revised Way Lower; Expect Negative Revisions to 3rd and 4th Quarter GDP; What About Autos?
In Support of Free Online Education

Posted: 09 Dec 2015 08:15 PM PST

Although well above the 2008 low of 7%, Gallup reports After Terror Attacks, U.S. Satisfaction Falls to 13-Month Low of 20%.

After the recent terrorist attack in San Bernardino, California, Americans' satisfaction with the way things are going in the U.S. dropped seven percentage points to 20%. This is the lowest level of satisfaction recorded since November 2014, but still above the all-time low of 7% in October 2008.

A seven-point month-to-month drop in satisfaction is rare but not unprecedented. Satisfaction dropped seven points in 2013 during the October partial government shutdown. It plummeted 12 points in the fall of 2008 as the economy crumbled, falling to the all-time low of 7% in mid-October of that year.

The recent high point in satisfaction is 32% in January and February of this year, the highest since the end of 2012. Satisfaction levels have been lower for the rest of this year. But despite month-to-month fluctuations, at least 25% of Americans have been satisfied each month until the December reading.

Question of the Day

Is a 25% satisfaction rate something to be pleased about?

Satisfaction Demographics

The political party satisfaction levels are rather interesting. Last month 42% of Democrats were satisfied but only 13% of Republicans. Is this simply a factor of who is in the White House?

Regardless, Democrat satisfaction plunged a whopping 15 percentage points to 27.

Gallup comments "White Americans remain less likely to be satisfied than nonwhite Americans, probably because whites are more likely to be Republicans."

Mike "Mish" Shedlock

Wholesale Trade: Another Bad Report, Inventories Decline, Prior Month Revised Way Lower; Expect Negative Revisions to 3rd and 4th Quarter GDP; What About Autos?

Posted: 09 Dec 2015 10:50 AM PST

Economists missed the wholesale trade report numbers by a mile. The Econoday Consensus Estimate for today's trade numbers was +0.2% in a range of 0.0% to 0.4%. The actual report (for October) came in at -0.1%.

That's bad enough, but some of the much touted inventory build for 3rd quarter (See Wholesale Trade Inventories Surge Led By Autos) did not happen.

Last month's report had me scratching my head. I certainly didn't expect such a jump. And it didn't happen. Today, September inventories were revised from +0.5% to +0.2%.

From Econoday

Wholesale inventories fell 0.1 percent in October against no change for sales, keeping the stock-to-sales ratio for this sector unchanged at 1.31. Wholesale inventories are on the heavy side as this ratio is well up from 1.22 this time last year. Year-on-year, inventories are up 3.6 percent which is well ahead of a 3.7 percent decline for sales.

Inventory builds reflecting falling sales include metals and autos, though strong sales of the latter at the retail level point to a bounce back for related wholesale sales. Inventory draws reflecting rising sales include furniture, apparel, and farm products.

Businesses including wholesalers watch their inventory levels carefully, limiting unwanted overhang as much as they can especially when sales are slow. The decline in October inventories, together with a sizable 3-tenth downward revision to September to plus 0.2 percent, may be negatives for third-quarter GDP but are positives for the production and employment outlooks. Watch Friday for the business inventories report which will include data from the retail sector.

Positives for Production?

Bloomberg comments "[Wholesale trade inventories] may be negatives for third-quarter GDP but are positives for the production and employment outlooks."

Let's investigate that claim with a dive into the actual Census Report on Wholesale Trade for a chart and more details.

Inventories to Sales

The inventory-to-sales ratio is clearly in the danger zone. Over-optimism across the board is generally what causes these spikes.

Year-on-year, inventories are up 3.6 percent but sales are down 3.7 percent. Inventories contributed heavily to rather anemic GDP growth this year.

What About Autos?

Inquiring minds may be wondering about autos. So, let's take a look at autos and other categories.

click on chart for sharper image

Let's put some key numbers in a table to make them easier to read.

Inventory and Sales - Percent Change From Year Ago
Group	Sales	Inventories	Sales-to-Inventory Ratio Current	Sales-to-Inventory Ratio Year Ago
US. Total	-3.7	3.6	1.31	1.22
Durable	-2.2	2.5	1.66	1.58
Automotive	2.3	13.1	1.77	1.6
Furniture	6.4	9.9	1.63	1.58

Take a good look at autos. Sales are up 2.3 percent but inventories are up 13.1%. Across the board, inventories-to-sales seem way out of line.

Unless sales pick up dramatically (and I highly doubt they will), inventories will be a huge drag on growth that will not only negatively impact 3rd Quarter GDP estimates, but also GDP estimates for multiple quarters looking ahead.

Mike "Mish" Shedlock

In Support of Free Online Education

Posted: 09 Dec 2015 09:46 AM PST

I have written on numerous occasions that the cost of education in the US is ridiculously high.

One solution is affordable online education.

If Everyone Pitched In

Yesterday, I received an email from Sal Khan, founder of the Khan Academy.

His motto is "You can learn anything. For Free. For Everyone. Forever."

With fewer than 100 employees, Khan Academy serves more than 15 million users each month with over 100,000 videos and exercises.

Email from Khan

Hi Mish

As you may know, Khan Academy is a small nonprofit with a big mission: a free, world-class education for anyone, anywhere. It's an ambitious goal, and we rely on donations from people like you to keep working toward it.

If all of you pitched in just $3, it would fund all of our work for the next year.

All gifts made in December are being matched by a group of our supporters, so I hope you'll take advantage of this opportunity to pitch in and double your impact.

Your support will help us keep building free content and making the site even better for millions of learners around the world.

All the best,

Sal Khan
Founder, Khan Academy
For free, for everyone, forever.

Free vs. Free Market

Nothing is really "free" of course. The academy depends on donations.

But the academy is a "free market" solution that does not depend on government handouts. It's a model we should all embrace. And donations are tax deductible.

I believe most Mish readers can afford a bit more than the $3 Khan asks. Regardless, whatever you can contribute, even $1 is appreciated.

If you share Khan's vision, please Make a Donation Today.

All gifts made in December will be matched dollar-for-dollar.

Mike "Mish" Shedlock

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Wednesday, December 9, 2015

Mish's Global Economic Trend Analysis

Mish's Global Economic Trend Analysis

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