Who really cares about manufacturing…Americans love to go shopping (Michael Pento)

Isn’t it great! Our production is plummeting

but our consumption is up. Weeeeeeeee!

Monday, November 15, 2010
By: Michael Pento

The U.S. manufacturing sector, which has declined to just 11% of GDP today from 28% of output in the early 1950’s, continues to erode. The inventory rebuild cycle appears to be over according to this morning’s release of the Empire State Manufacturing Survey. The Index plunged 27 points in November to register a negative 11.1 from a positive in 15.7 October. That reading was the lowest since April 2009 and the first contraction since July 2009.

The details of the report were also decidedly dour. The Empire State gauge of new factory orders plummeted 37 points to minus 24.4 from a positive 12.9 last month. A measure of shipments fell to minus 6.1 from a positive 19.4. The employment measure decreased to 9.1 this month, from up 21.7 and the average workweek index dropped to -13.0.

But who really cares about manufacturing…Americans love to go shopping don't you know. Retail sales in the U.S. climbed 1.2% October, the most in seven months. Isn’t it great! Our production is plummeting but our consumption is up. Weeeeeeeee!

Of course, economists are cheering this retail number and downplaying the manufacturing data in the belief that consumer spending will save us from another depression. But borrowing to consume is what got us in trouble in the first place. And since production is falling we have no way to pay back our creditors. The consolation we offer our foreign lenders is this; it isn’t such a big deal that we can’t pay you back because even if we did, the currency is becoming worthless anyway.

Michael Pento, Senior Economist at Euro Pacific Capital is a well-established specialist in the “Austrian School” of economics. He is a regular guest on CNBC, Bloomberg, Fox Business, and other national media outlets and his market analysis can be read in most major financial publications, including the Wall Street Journal. Prior to joining Euro Pacific, Michael worked for a boutique investment advisory firm to create ETFs and UITs that were sold throughout Wall Street. Earlier in his career, he worked on the floor of the NYSE.