Central Perk

marți, 10 noiembrie 2015

Mish's Global Economic Trend Analysis

Fight for $15 vs. Drive to "Completely Obviate" Need for Fast Food Workers
Wholesale Trade Inventories Surge Led By Autos
Economists Blame Mild Weather For Poor Retail Sales
US Import/Export Prices Show Cross Border Deflationary Pressures
China Posts Lowest Business Sentiment on Record as Deflationary Pressures Rise

Fight for $15 vs. Drive to "Completely Obviate" Need for Fast Food Workers

Posted: 10 Nov 2015 10:10 PM PST

Fight for $15 Protests Sweep US

The fight for a "living wage" of $15 per hour is raging the US. Here are a few recent headlines.

LA/USA: L.A.-Area Workers Join Nationwide Protest Demanding $15 Minimum Wage
Jackson Mississippi: Jackson Workers Join the 'Fight for 15' Protest
LA: Thousands March in L.A. as Part of Nationwide Call to Raise Minimum Wage
Detroit: Detroit Fast-Food Workers Strike for $15-an-Hour Wage
USA : Fast-food Workers Strike, Seeking $15 Wage, Political Muscle
Oakland: Massive Protest For $15 In Oakland: "Come Get Our Vote"
Chicago: Fast food workers in Chicago push for $15 minimum wage

Fast Food Robots

Those fighting for a $15 living wage need consider Hamburgers, Coffee, Guitars, and Cars: A Report from Lemnos Labs.

Momentum showed off its prototype hamburger-making robot, which is expressly designed to displace two to three full-time kitchen workers, thus saving fast-food companies up to $90,000 per franchise per year, or $9 billion nationwide. In a matter of minutes, the machine can grill a beef patty, layer it with lettuce, tomatoes, pickles, and onions, marry it with a bun, and wrap it up to go. (I saw it with my own eyes.)

In addition to restaurant automation, the Lemnos companies are exploring areas like street-legal electric shuttles for corporate campuses (Local Motion), a new generation of electric guitars that take advantage of the smartphone revolution (Unplugged Instruments), and helping baristas brew the perfect cup of coffee (Blossom Coffee). Along with their peers at other specialized accelerators, such as Rock Health, Greenstart, and Media Camp, these entrepreneurs are trying to prove that a rapid-iteration mindset and a focus on customer needs can help almost any kind of technology startup get off the ground.

"Our device isn't meant to make employees more efficient," said co-founder Alexandros Vardakostas. "It's meant to completely obviate them."

Obviate the Workers

By all means let's pay workers $15 an hour, the ones with a job. But let's also pay 80% of the current set of fast food workers precisely what they are worth: Nothing.

That may sound harsh, but it's simple economic reality. Here's the real deal: Once machines cost less than worker salaries and benefits, the replaced human workers are essentially worthless.

It's not quite that simple because many people, myself included like human contact. For example, I do not use self-checkout lanes.

Yet, I have to wonder: How long will it be before there is an extra charge for having a human checkout clerk?

And at a fast food or chain restaurant, I don't care is I have human contact or not. Indeed, I would rather click buttons myself, accepting responsibility for my order. To top off the benefits, there is no need to tip a robot.

Counterproductive Push for $15

The push for $15 is counterproductive.

Not only will higher minimum wages displace workers, if everyone's wage rose, $15 would no longer be a "living wage".

And the higher the wages and benefits, the greater the incentive for companies to replace workers with hardware and software robots.

Mike "Mish" Shedlock

Wholesale Trade Inventories Surge Led By Autos

Posted: 10 Nov 2015 09:39 AM PST

Autos are the sales Energizer bunny. Nothing seems to slow them down. Wholesale Inventories Surprised to the Upside, led by autos.

Wholesale inventories rose 0.5 percent in September following an upward revised 0.3 percent gain in August. The September build appears to be intentional based on a 0.5 percent rise in September sales that keeps the stock-to-sales ratio for wholesalers unchanged at 1.31.

Inventories of autos rose 2.3 percent as wholesalers try to keep up with what is very strong retail demand for autos. Excluding autos, the stock-to-sales wholesale ratio is unchanged at 1.27.

Inventory draws reflecting gains in sales include computer equipment, electrical goods, and apparel. Wholesale inventories of furniture rose on a swing lower for sales.

Inventories in general are heavy and businesses, waiting for a pick up in sales, are being careful to keep them in check. Today's results are in line with Commerce Department assumptions and should have little bearing on third-quarter GDP revisions.

Reflections on Batteries

At some point batteries die. When that happens to auto sales remains to be seen, but what cannot last forever clearly won't.

On the personal side, I am headed from Zion to Bryce Canyon National Park for a couple of days.

Mike "Mish" Shedlock

Economists Blame Mild Weather For Poor Retail Sales

Posted: 10 Nov 2015 09:25 AM PST

Goldilocks Weather Bad For Shopping

Weather in the past two months has generally been unseasonably pleasant.

Economists say this is bad for shopping as Redbook's Same Store Sales Report shows retail sales year-over year are only up 1.1%.

Sales in Redbook's same-store sample slowed sharply in the November 7 week, to a year-on-year plus 1.1 percent from an already moderate 1.9 percent in the prior week. Unseasonably warm weather has been hurting sales of seasonal goods, which could be a factor in Friday's retail sales report for October. Turning back to November and this report, readings in the early part of the month will be forgotten as attention turns to the holiday kickoff late in the month.

Definition

Redbook is a weekly measure of comparable store sales at chain stores, discounters, and department stores. Figures for the first week of the month are compared with the average for the entire previous month. When two weeks are available, then these are compared with the average for the previous month, and so on through the month. It might be more useful to compare year-over-year figures since these are indeed compared to the comparable week a year ago. This index is correlated with the general merchandise portion of retail sales covering about 10 percent of total retail sales.

Weather Comments

Apparently, weather needs to be just right, not for comfort levels, but to induce shoppers to buy. Supposedly, it's important that weather not be too good. Colder weather would be good now, but colder weather in January won't be.

I propose comparing weekly retail sales to the same week as last year or to the monthly average a year ago is essentially meaningless, if not outright ridiculous.

Mike "Mish" Shedlock

US Import/Export Prices Show Cross Border Deflationary Pressures

Posted: 10 Nov 2015 08:36 AM PST

There's a slew of US economic reports out today.

Let's take a look starting with a look at Import and Export Prices as described by Econoday.

Cross border price pressures continue to move lower. Import prices fell 0.5 percent in October including a steep 5 tenths downward revision to September to minus 0.6 percent. And it's not just gasoline! Nonpetroleum import prices fell 0.4 percent for the 10th decline in a row. Year-on-year, total import prices are down 10.5 percent, which is right in line with trend, with nonpetroleum down 3.4 percent for the largest drop since October 2009.

The story on the export side is the much same with export prices down 0.2 percent for a year-on-year decline of minus 6.7 percent. Excluding agricultural products, export prices fell 0.3 for a year-on-year decline of minus 6.1 percent.

Prices have been falling steadily for about a year in this report with declines also appearing for finished goods in what is a very important deflationary trend. Import prices for capital goods are down 2.3 percent year-on-year with vehicles down 1.6 percent and consumer goods down 0.6 percent. The export side is similar including a 2.4 percent year-on-year decline for consumer goods.

By country, contraction is steepest with Canada where import prices fell 1.0 percent in the month for a 20.5 percent year-on-year decline. Latin America is next, also down 1.0 percent in the month for a year-on-year decline of 14.7 percent. Import prices fell 0.1 percent with China where the year-on-year rate is minus 1.4 percent while prices with Europe actually rose 1 tenth in the month for a year-on-year minus 2.9 percent.

Contraction in import prices not only reflects low commodity prices but also the strength of the dollar which has been giving U.S. buyers more for their dollars, while contraction in export prices reflects generally deflationary global trends. Fed policy makers may be worried that slack has been absorbed in the labor market but they are also concerned about the continued lack of price pressure, the latter speaking against the urgency for a rate hike.

Import/Export Prices vs. Consensus

Economists were pretty close to the mark on export prices, but missed the boat totally on imports.

The consensus import price change was -0.1% with the actual result of -0.5%, outside the range of any economist's estimate.

Falling prices are a good thing actually, but the Fed sure does not see it that way.

As noted just a bit ago ...

Mike "Mish" Shedlock

China Posts Lowest Business Sentiment on Record as Deflationary Pressures Rise

Posted: 10 Nov 2015 08:11 AM PST

Markit reports China Posts Lowest Business Sentiment On Record. Data only dates to November of 2009, so that makes sentiment worst since the recovery.

However, sentiment is so low, I it's possible sentiment is worse that any time in the past 20 or even 30 years, had it only been measured. Let's take a look at the report.

The latest Markit Business Outlook Survey signalled the weakest level of optimism amongst Chinese companies since data collection began late-2009. This was highlighted by a net balance of just +17% of firms expecting business activity to rise over the next year, down from a previous low of +23% in June.

Average input prices faced by Chinese businesses are expected to rise only slightly over the coming year. A net balance of just +3% of firms forecast higher input costs in October, down from +9% in June, to signal the weakest inflation expectations in the series history.

At the sector level, manufacturers anticipate a fall in cost burdens (net balance of -6%). This is the first time deflation has been forecast in the sector since mid-2012. In contrast, service sector companies expect input costs to increase over the next year, though October's net balance of +14% is the lowest for a year.

China Business Expectations

Deflationary Pressures Rise

Sentiment largely reflects continuing deflationary cost pressures on manufacturers.

For details, please see China's PPI Drops 44th Month, Chinese Trade Slumps on Waning Demand, Deflationary Pressures.

Mike "Mish" Shedlock

Seth's Blog : Certain failure

Certain failure

Last night, a comedian tried out some new material, and someone in the front row didn't laugh.

Last week, I put up a post with a new idea in it, and thousands of people who read it didn't retweet or share it.

Last year, someone ran for office and didn't get every single vote cast.

Failure! Certain failure.

Of course your next project isn't going to delight everyone. That's impossible. It's certain that for some people, your project is going to be a failure.

At the same time, it's also quite unlikely that your project will please no one.

So now, we can agree that it's all on a spectrum, and that success and failure are merely localized generalizations.

Once you realize that failure is certain, it's a lot easier to focus on impact instead.

• Email to a friend •

luni, 9 noiembrie 2015

Mish's Global Economic Trend Analysis

China's PPI Drops 44th Month, Chinese Trade Slumps on Waning Demand, Deflationary Pressures
Merkel's Cream Puff "Tougher" Stance
Reader Asks "Without a Job, Who Can Afford to Buy What Robots Make?"

China's PPI Drops 44th Month, Chinese Trade Slumps on Waning Demand, Deflationary Pressures

Posted: 09 Nov 2015 08:37 PM PST

China's PPI Drops 44th Month

China's CPI is up a modest 1.3 percent year over year but Producer Prices Fall for 44th Month.

China's consumer inflation moderated again in October, while producer prices declined for the 44th straight month, as falling commodity prices and weak demand add to deflationary pressure.

The producer price index (PPI) fell 5.9 percent in October from a year earlier, identical with the decline in September, and slightly more than economists' forecasts of a 5.8 percent drop.

China's CPI Slows Amid Deflationary Pressures

The Wall Street Journal reports China's Inflation Slows in October.

China's consumer inflation dipped further last month due to lower food prices, adding to what economists say are signs of slack demand and slowing in the world's second-largest economy.

China's consumer-price index rose 1.3% in October last month from a year earlier, according to the government's statistics bureau. The pace was slower than the 1.6% year-over-year rise in September and a tick down from the median 1.4% gain forecast by 11 economists in a survey by The Wall Street Journal. Prices of goods at the factory gate fell 5.9% in October from a year earlier, matching September's decline.

"It's quite clear, China is facing deflationary pressure," said Mizuho Securities Asia Ltd. economist Shen Jianguang. "The issue is how to revive growth that's been below target, while restructuring the economy to reduce overcapacity."

Trade Slumps on Waning Demand

Chinese imports and exports hit the skids as Trade Slumps on Waning Demand

China's trade with the rest of the world fell sharply in October from a year earlier, with imports of raw materials particularly hard hit as slowing Chinese investment feeds through into weaker demand in the world's biggest trader of goods.

Chinese imports fell 18.8 per cent in October from the same month a year earlier, a slight improvement from the 20.4 per cent year-on-year fall in September. Sharply lower prices of oil and other commodities also helped scythe the bill.

Exports declined 6.9 per cent in October from a year earlier, deteriorating from the 3.7 per cent fall the previous month as weak global demand and higher Chinese costs led to slumping shipments of the cheap Chinese goods that have flowed to the world in the last decade.

At the start of the year, the ruling Communist party set a target of 6 per cent growth in trade for this year but total trade has now fallen by just over 8 per cent in the first ten months of 2015 compared with the same period a year earlier.

In the first 10 months of the year, Chinese exports to the US were up 5.2 per cent from the same period in 2014, while exports to countries in Asean were up 3.7 per cent, according to Chinese customs figures.

Exports to the EU, Japan and Hong Kong — which serves as a transit point for exports to many other parts of the world — fell by 4.1 per cent, 9.5 per cent and 12.2 per cent respectively.

No Decoupling

I have stated this several times before but it's worth noting again: The widely believed notion that China would decouple from the global markets in 2007 and 2008 was as silly then as the notion the US can do the same today.

Mike "Mish" Shedlock

Merkel's Cream Puff "Tougher" Stance

Posted: 09 Nov 2015 02:40 PM PST

The Financial Times reports Merkel Takes Less 'Welcome' Tone on Refugees as Pressure Builds.

Refugees securing asylum in Germany should expect long delays before they can bring over their families, Chancellor Angela Merkel warned on Monday in a departure from the "welcome" policy critics have blamed for triggering a huge influx of migrants.

The announcement came amid signs of demands in the ruling CDU/CSU bloc for a tougher response to the crisis, with Wolfgang Schäuble, finance minister, adding his voice to those advocating immigration restrictions.

Steffen Seibert, Ms Merkel's spokesman, said on Monday there had been no legal change in the government's policy. Still, in a clarification that may be welcomed by some hardliners, he explained that even refugees entitled to bring in their families could not now expect to do so because immigration officials were busy dealing with the wave of arrivals.

"When you see this reality from one end of the country to the other, then it is clear to everyone: family reunion as it has been understood until now cannot currently take place," he said.

His words appeared to be aimed at countering the positive image of Germany among refugees that was created in the summer by Ms Merkel's open doors policy for Syrians.

Bring the Wife and Kids

Somehow, "no change" is a tougher stance. But let's work this symbolic change to the end meaning: If you are going to come, bring the wife and kids in the first place.

Mike "Mish" Shedlock

Reader Asks "Without a Job, Who Can Afford to Buy What Robots Make?"

Posted: 09 Nov 2015 04:43 AM PST

In response to Robots Will Change World Beyond Recognition reader "DB" has a couple of questions:

Who can afford to buy what the robots produce?
Does this lead to a world war between the have and have-nots?

Those are key questions that should be on everyone's mind. But recall there were two viewpoints written in my post. Bank of America paints one picture and McKinsey another.

McKinsey: Automation Will Change Jobs More Than Kill Them
Bank of America: Robots and other forms of artificial intelligence will transform the world beyond recognition as soon as 2025

Pater Tenebrarum at the Acting Man blog pinged me with his thoughts (similar to ideas I have expressed before).

I'm convinced McKinsey is right, for the simple reason that this is precisely the history of economic progress: the more productive production processes have become due to automation, the more the division of labor has increased, and the more new jobs and industries have come into being, and the more incomes, leisure time and life expectancy have increased as well. Just watch this fascinating video and think about it for a moment: Would we be better off or worse off if this machine didn't exist?

Emphasis his, video follows.

Link if video does not play: WFL M60 MillTurn Complete Crankshaft Machining - MARTECH Machinery, NJ - USA

One could have presented a thousand videos if not ten thousand videos asking the same question Pater posed: "Would we be better off or worse off if this machine didn't exist?"

The problem is not technology. Rather, the problem is the Fed's response to technology.

Reader Brad agrees. Brad writes ...

Your conclusion was perfect: "Regardless of which viewpoint you think more likely, it should be perfectly clear that robots are a huge deflationary force."

The elites don't comprehend it.

Brad

Central Bank Insistence on Inflation in a Deflationary World

Central bank insistence, especially the Fed's insistence, on 2% inflation in a technologically deflationary world is precisely the driver of income inequality that the Fed and others complain about.

The solution is not higher minimum wages, but rather deflation that let's people buy more with their money. It's not about how much one makes but how far it goes that matters. And the Fed is hell-bent on making sure the money you make goes less far each year.

Fed policy benefits the banks, the government taxing bodies, and the already wealthy with first access to money. Will this eventually lead to a war between the have and have-nots?

Actually, an economic war is already underway. How violent the war gets remains to be seen.

Mike "Mish" Shedlock

Damn Cool Pics

This Cat And Mouse Have A Relationship That Will Surprise You
Perfectly Timed Sports Photos That Are Simply Spectacular
Abigail Breslin Has Grown Up To Be A Gorgeous Young Woman

This Cat And Mouse Have A Relationship That Will Surprise You

Posted: 09 Nov 2015 05:59 PM PST

Cats and mice are supposed to be eternal enemies, but that doesn't seem to be the case between these two friends.

Perfectly Timed Sports Photos That Are Simply Spectacular

Posted: 09 Nov 2015 01:29 PM PST

In the world of sports the action is always live and the best thing about live action is that it always creates perfectly timed photos such as these ones.