Capital Wave Forecast: The Fake Manufacturing Recession Narrative Is Scaring Investors: Don’t Buy into It

0 | By Shah Gilani

If you think the current “manufacturing recession” in the United States is going to sink the economy and the stock market, you’re not alone.

That’s exactly what some major media outlets are trying to plant in your head right now.

Consumers and investors are being inundated with bad news about manufacturing… and a lot of them are scared.

A New York Times headline from this summer 2019 pushed the idea that a manufacturing recession will infect the economy by saying, “U.S. manufacturing slowed in August in latest sign of economic weakness.”

The Los Angeles Times got on-board shortly after in October announcing, “Manufacturing is now officially in recession, despite Trump’s vow to boost economy.”

CBS upped the fearmongering stating the manufacturing recession as a fact and making it sound viral saying, “U.S. manufacturing is in a recession. What does that mean for the rest of the country?”

Back in July PolitiFact quoted a candidate for president as an expert with the statement, “Elizabeth Warren says manufacturing is in recession…”

Then in October CNN, the media source of all Breaking News, trumpeted, “US Manufacturing Looks Weak. That’s a Problem.”

Even Bloomberg Business got on the naysaying train in October suggesting, “Manufacturing in Recession Might Spread to U.S. Economy.”

And MSN, the blatant basher of good news, claimed, “US manufacturing in ‘technical recession’.”

The problem is that it’s all fake news…

Hardly “Recession” Numbers…

Sure enough, by one measure manufacturing has been slipping over the last four months. But it’s been picking up and showed its strongest reading in November over the last seven months by another measure.

According to the ISM (Institute for Supply Management) PMI (Purchasing Managers Index) “survey”, which tallies respondents’ answers into a number, where 50 is the neutral line, above which constitutes growth, and below which constitutes contraction, the PMI’s been below 50 for the last four months.

November’s number came in at 48.1. October was 48.3. September was 47.8. August was 49.1.

December’s tally isn’t in yet, but analysts are expecting it to get back close to or above 50.

For all of 2019, the average through November is 51.8. The low month was September’s 47.8 reading, and the high month was January’s 56.6 mark.

Another gauge of manufacturing, the Markit Group’s PMI measure, came in at 52.6 for November, which is 2.5% higher than October’s 51.3 measure and was the “strongest reading in seven months,” according to Markit.

However, the media chooses to report ISM PMI numbers over Markit’s PMI numbers, which are never reported by mainstream outlets, because the media wants to paint a doom and gloom future and scare investors.

What’s more patently fake is attaching the recession moniker to manufacturing.

A recession is defined as two consecutive quarters of negative GDP growth, meaning the country’s gross domestic product is contracting, as in not growing at all, with minus signs in front of numbers.

Even if we assume manufacturing growth is measured the same way that GDP growth is measured, which it isn’t, we’d have to see two consecutive quarters (6 months in a row) of negative growth. It’s not slowing growth, but negative growth, as in a true contraction, that counts.

The ISM’s PMI numbers have been below 50 for the last four months, that’s not a recession even by the media’s twisted definition.

Where the Media and Fed Go Their Separate Ways

The Federal Reserve has its own ways of measuring manufacturing.

YiLi Chien, Senior Economist, and Paul Morris, Research Associate at the Federal Reserve Bank of St. Louis, in the Bank’s “On the Economy Blog” asked rhetorically “Is U.S. Manufacturing Really Declining?”

They acknowledge, “A popular narrative over the past decade has been U.S. manufacturing’s precipitous decline.” But they show despite marked down-trends in manufacturing as a share of employment in the country and manufacturing as a share of nominal GDP, the “numbers exaggerate manufacturing’s decline.”

“To see why,” they explain, “we need to measure the manufacturing sector’s share of real GDP.”

Their research reveals:

“The total value of goods produced is equal to the price multiplied by the quantity of goods produced. Removing the price effects from nominal GDP gives us real GDP, so changes in real GDP are the result of changes in the quantity produced. Thus, we can measure how the manufacturing sector’s output has changed over time.”

And continues saying:

“The decline in manufacturing’s share of nominal GDP over time thus must be because of changes in prices. Since 1947, the price level for the overall economy has grown 3.2 percent per year on average, while prices for manufacturing have grown just 2.2 percent per year.

This implies that nominal GDP for the entire economy has outgrown manufacturing GDP largely because the overall price level has increased faster than the manufacturing price level, and not because the manufacturing sector has produced less relative to the rest of the economy.

This quick inspection of the data indicates that manufacturing in the U.S. has not suffered a significant decline. Rather, manufacturing’s roughly constant share of real GDP and declining employment share indicate an increase in productivity of the manufacturing sector relative to the overall economy. This is likely because of automation.

With advanced tools such as robotics to handle tasks that were previously completed by employees, the average employee is able to produce more now than in years past. Thus, firms don’t need to hire as many workers to produce the same amount of output.

Even though “GDP From Manufacturing” in the United States decreased to 2167.30 USD Billion in the second quarter of 2019 from 2178.20 USD Billion in the first quarter of 2019, manufacturing is historically strong as a contributor to overall GDP.

GDP from Manufacturing in the United States averaged 1990.31 USD Billion from 2005 until 2019, reaching an all-time high of 2178.20 USD Billion in the first quarter of 2019 and a record low of 1798.60 USD Billion in the first quarter of 2009. source: U.S. Bureau of Economic Analysis (BEA).


How They to Keep It All Under Wraps

The media’s fake manufacturing recession narrative will never cheer on manufacturing as a contributor to positive GDP growth, because it’s the truth.

Manufacturing job growth is another positive for the economy that’s not being reported.

The fake news media was hoping to start headlining how manufacturing jobs growth is declining, instead of the accelerated growth in manufacturing jobs seen since President Trump took office.

But they can’t after the most recent employment numbers just showed 266,000 new jobs were created in November, with 54,000 of those being in manufacturing.

Yes, manufacturing jobs growth paused, but it’s still growing.

Good luck finding a headline on that.

Creating more manufacturing jobs is good. That’s why the media’s not reporting it.

Despite the disappearance in the past few years of what had long been a big hourly wage premium for workers in durable-goods manufacturing over other private-sector workers, manufacturing jobs have remained better-than-average jobs, especially for those without college degrees, with longer, more reliable hours and more generous benefits than most service work.

Everyone knows President Trump takes credit for the strong economy and for the record-breaking stock market. The country’s seen a huge uptick in manufacturing under the Trump administration, but the media is knocking manufacturing because they know they can and the President can’t claim victory in manufacturing just yet, as the trade war with China rages on.

Attacking manufacturing is the fake news media is a way of attacking the President’s reelection prospects.

By fearmongering, the Trump hating media hope to undermine consumer confidence and investor confidence. If consumers pull back on spending, they could turn the economy down. If investors sell stocks out of fear that a “manufacturing recession” could infect the economy and the stock market, they could turn the soaring stock market upside down.

They’re trying to scare the American public. And that’s the only scary thing out there.

The economy’s growing and the stock market’s making higher highs all the time.

You’re only missing out if you’re scared, and there’s no reason to be scared.

What You Should Do Instead to Make A Lot More Money

The stock market’s going a lot higher, and you’ve got to be in it to win it, so get off the sidelines and join the party.

Two stocks I like to play manufacturing in 2020 are TPI Composites (TPIC) and 3M Co. (MMM).

TPI is a small cap company that happens to be the largest manufacturer of composite wind blades in the U.S. Its blades are used for manufacturing electricity from wind farms in the U.S. and globally. The company loses money, but that’s about to change. Revenue growth registered 50% last quarter over the previous year. And with wind generated power expected to increase 15-fold by 2040, TPI is going to be a leader and U.S. star.

3M is of course known for its manufacturing prowess. Its stock has been hit by the trade war with China, but it poised to rebound at least 25% in 2020 and likely another 25% by the end of 2021. Besides being a manufacturing juggernaut, the stock sports a 3.26% dividend yield.

Owning these two manufacturing plays will keep you ahead of the fake manufacturing recession trap.

And because this message is so important to me, my team behind Capital Wave Forecast created this new Facebook page just for you and others like you to combine forces and make the most of markets and navigate through the media spin.

I will shortly be revealing information there that will be crucial for your financial growth and education.

This is just the beginning of a series of reports that will be easily available to you there.

Things are about to get much clearer and better starting now, join me here now…


Shah Gilani

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