Expect the Unexpected
US Factory Orders "Unexpectedly" Decline; US Car Sales "Unexpectedly" Decline; Expect the Unexpected
The words for the day once again are "unexpectedly declined". I have a couple of examples.
The New York Times reports "U.S. Factory Orders Fall Unexpectedly":
New orders for factory goods unexpectedly fell in the United States in June, a fresh sign that the slowdown in the country's manufacturing sector will probably stretch into the second half of the year.
The Commerce Department said on Thursday that new orders for manufactured goods dropped 0.5 percent during the month. Economists in a Reuters poll had forecast a rise of 0.5 percent.
American factories appear to be one of the sectors most vulnerable to Europe's festering debt crisis. The trend in American manufacturing has appeared softer and has added to concerns the economic recovery is losing steam. The decline in new orders in June will probably mean softer output down the road, which could weigh on economic growth.
Car Sales "Somewhat Softer Than Expected"
Yesterday, Yahoo!Finance reported U.S. auto sales remain soft in July:
Major automakers reported U.S. auto sales for July that were somewhat softer than expected as high U.S. unemployment and weak consumer confidence kept would-be buyers on the sidelines.
July auto sales showed the continuation of what has been a slowdown in growth since the late spring. Sales early this year shot past even the most bullish forecasts, but starting in May, the rate of improvement started to weaken.
"If we were talking in February this year and you asked me what we're going to have July, I'd say at least 14 and a half," said TrueCar.com analyst Jesse Toprak. "But we're going to barely get to 14."
GM, the largest U.S. automaker, reported on Wednesday a 6 percent drop in July U.S. sales, while Ford posted a 4 percent drop. The smallest U.S. automaker, Chrysler Group LLC, posted a 13 percent increase.
GM and Ford both pinned their declines on lower sales to fleet customers like rental car companies. GM's fleet sales fell 41 percent, in line with the company's forecast last month.
But their overall results were still lower than some estimates. Analysts had expected better financing deals, pent-up demand and increased construction spending to offset the sluggish U.S. economy.
Toyota sales were up 26 percent to 164,898 in July. A year ago, Toyota was still grappling with major vehicle shortages stemming from the March earthquake in Japan. In a release, Toyota said customers were taking advantage of long-term, low-interest financing at low lease rates.
Expect the Unexpected
Why economists could not see this coming is a mystery. Manufacturing new orders have collapsed virtually everywhere, including the US. GDP, a lagging indicator, is 1.5% annualized, well below the stall speed of 2%.
Based on new orders and anecdotal evidence from the world's largest auto parts manufacturer, I confidently predicted on July 9, Global Collapse In Auto Sales Coming Up.
Yesterday I noted Dismal Manufacturing Numbers Worldwide; US ISM in Contraction Second Month.
Yet economists were surprised by today's "unexpected decline" in US Factory Orders and yesterday's decline in auto sales.
The surprise ought to have been that car sales and factory orders held up as well as they did.
Growing Evidence of Recession
With each economic report, it becomes more clear the US is already in recession, yet economists cannot see that yet either.
If the jobs report is miserable tomorrow, and I expect it to be, then expect economists to be surprised by that too. For Friday's job forecast ADP predicts +163,000 jobs but I'll Take the Under (Way Under).
The economic consensus for Friday is about +100,000 jobs and I will take the under on that as well. Zero to 50,000 would not surprise me in the least.