Monday, April 02, 2012
Manufacturing Up? Really?
I have a hard time understanding what's driving U.S. manufacturing growth. The ISM doesn't massage its statistics nearly as much as government agencies, so its numbers are probably accurate. The government's last revisions put GDP growth for Q4 2011 at an annual 3.0% but those numbers are so twisted with seasonal statistical adjustments that they mean less now than they did a generation ago. Manufacturing still adds value but not as much as it did in grandpa's day before the U.S. outsourced all of its hard work to Asia. Compare the value added by manufacturing to the value added by finance/insurance/real estate. The FIRE sector wins hands down. See how skewed the U.S. economy has become? That's why it's so easy for the Fed's ZIRP policy to impact nominal GDP; so much more of the GDP figure now depends on easy credit and leverage for the FIRE sector.