Business

These Graphs Show Two Important Sectors in the Economy Going in Opposite Directions

Manufacturing and housing (specifically construction) are two important sectors of the U.S. economy. But let’s say one improves while the other declines. What do you think would happen?

They could have a “cancelling out” effect on each other, meaning that rather than speed up or slow down economic recovery, they’ll simply drag out what we currently have: a lagging, depressed economy. And we may be looking at this situation right now with the improvements in the housing sector and declines in manufacturing.

“For the first time all year, sales prices for existing homes rose in April. Home sales are up, too,” The Atlantic’s Derek Thompson reports.

Construction improved as well:

Manufacturing and Houseing Market Graphs Headed in Opposite DirectionsImage courtesy Calculated Risk

So, hey, that’s not too bad, right? At least there has been an improvement in what has long been a badly hurt sector of the American economy. Before you get too excited, remember U.S. manufacturing is slipping.

“There is a global slowdown everywhere: Europe is in a continental recession and there are plenty of signs of trouble in China and India. As a result, a key index for manufacturing strength has fallen below 50% for the first time since the recession,” Thompson writes.

Manufacturing and Houseing Market Graphs Headed in Opposite DirectionsImage courtesy Calculated Risk

Simply put, housing is looking up while manufacturing is looking down.

“If someone looked at just manufacturing, they might think the US is near a recession,” Bill McBride of Calculated Risk writes. “And if they just looked at housing, they’d think the economy is recovering. Which is it?”

Indeed, which is it? McBride argues that we should monitor developments in the housing sector to gauge where our economy is headed. Thompson, on the other hand, is a bit more uncertain.

“Housing has had something like twenty thousand false starts, and even a true start will announce the beginning of a very difficult recovery, given slow-rising wages, difficult access to credit for middle-class Millennials and Gen-Xers, and a huge shadow inventory,” Thompson writes.

So what does he predict?

“The most likely scenario, I think, is that housing shifts from neutral to first gear and manufacturing shifts from second gear to join housing in first gear, and two big industries slowly growing gives us basically the same recovery rate we’ve had: slow, frustrating, precarious, and, somehow, consistent,” he adds.

This story has been updated.

Comments (36)

  • WatchingAmericaDie
    Posted on July 7, 2012 at 3:05am

    Too many so-called “experts” just keep blowing hot air. Each and every taxpaying citizen owes the federal govt $126,000 and the feds will get what’s owed to them. Whether they tax the life out of us or monetize the debt, we are screwed. America has been on the decline since the dotcom bubble, and Obama and the Dems have accelerated the decline.

    Report Post »  
    • girlnurse
      Posted on July 8, 2012 at 9:37pm

      NOPE! I do NOT accept their debt! Dont buy into that bs..

      Report Post » girlnurse  
  • Hope07
    Posted on July 7, 2012 at 12:28am

    I feel the same way as the poster earlier. I would like to slap him across the face also. Would feel so good. The EU accounts for 25% of world trade and its heading for a Depression not recession. And its Dragging the rest of the world in to a severe recession. Surprise Surprise..And here Our GOV is too dang Big, which is stifleing our economy , with Taxes and uncertainity.. And soon we will be in a Depression ourselves. O Boy.

    Report Post » Hope07  
  • sillyfreshness
    Posted on July 6, 2012 at 11:27pm

    What recovery do they keep talking about? I mean you could say the US was in a recovery from December 1, 1929 all the way until WWII started. You still have 8.x% unemployment which is more actually around 18%. There is no recovery for those 8% or 18% who still don’t have jobs. There is no recovery. The only recovery going on right now is for Wall Street. They seem to be doing fine. Moreover, you won’t see much of a housing boom if manufacturing slows. Less people will be hired if there is less demand for products. Personally I think we‘re F’d and this collapse is inevitable.

    Report Post » sillyfreshness  
  • affinity
    Posted on July 6, 2012 at 9:47pm

    The Feds did nothing to solve the U.S. housing mortgage mess because there’s too much borrowed currency in the global currency markets already and nobody knows how to increase economic activity without crashing the entire world economy.

    Here’s how I see the big picture: There is more currency in the world than there are real assets and capital goods. Or worse, nobody knows how to value anything anymore because everything is mathematically convoluted.

    http://en.wikipedia.org/wiki/Convolution
    http://en.wikipedia.org/wiki/Currency
    http://en.wikipedia.org/wiki/Assets
    http://en.wikipedia.org/wiki/Capital_(economics)

    We’re broke.

    The only way we can get through this is for the world governments to accept a new way of valuing a worldwide base (standardized) currency system, set a value that can be measured and depended on, and find a new way for governments to earn a living instead of taxing people or stuff. Taxation is an outdated system.

    Report Post »  
    • lukerw
      Posted on July 6, 2012 at 11:37pm

      Ad Hoc Investment, Debt, and Risk… leads to Spider Webs of interrelated Complexity… alike Derivatives & Interest Swaps existing en-masse… resulting in the inability to Unwind, Stop, or Understand the Liability!

      Report Post » lukerw  
  • RebelPatriot
    Posted on July 6, 2012 at 8:54pm

    PAY NO ATTENTION TO THE DATA, IT’S VERY MISLEADING! Said the King from behind the White House walls. All is well and our programs and policies are working just as we planned, don’t worry.

    One more term and I will have the American people right where I wanted them, begging for help, said King Hussein under his breath, as he drew the curtains closed from the White House.

    I don’t think so, anymore of King Hussein will draw the peasants to the White House lawn in protest.

    I wonder if King Hussein will be more or less reluctant to vacate his office than the King of Syria?

    Report Post »  
  • WAKEUPUSA2012
    Posted on July 6, 2012 at 7:05pm

    The economy is not going to get better. All you have to do is study the private Fed and history to see that the elites want econmic meltdown.

    On another level, everyone needs to read this article.

    http://www.infowars.com/army-manual-outlines-plan-to-kill-rioters-in-america/

    Report Post » WAKEUPUSA2012  
  • sbenard
    Posted on July 6, 2012 at 6:08pm

    Housing is NOT looking up! This article was posted on the Zero Hedge website TODAY. It was mocking those who claim that housing in improving:
    http://www.zerohedge.com/news/point-out-housing-bottom-chart
    The point of the chart is that there is NO bottom in housing!

    Report Post » sbenard  
  • bravjim
    Posted on July 6, 2012 at 5:34pm

    They do not cancel each other out. Manufacturing is more of a leading indicator than is housing. When manufacturing sinks, that means less production, and manufacturing is what creates wealth. Housing is a product of manufacturers going up, creating more wealth, and then those people that work for the manufacturers have money to buy housing. And the housing market relies on manufacturing to a degree. Someone has to produce the lumber, the brick, the roofing shingles, the tile, the cabinets. Either way, those numbers could reverse themselves next month

    Report Post »  
    • Jaycen
      Posted on July 6, 2012 at 5:52pm

      True, unless the government creates an artificial bubble, which is what lead to the current crisis.

      Actually, any time the government pays for something that the free market doesn’t already want, it creates an artificial bubble and stresses the entire system. The rest of the market struggles to adjust the value of other goods based on the artificial demand created using tax payer dollars.

      In all, I find the entire article strange. I wonder which manufacturing sector they talk about when they say “manufacturing”. I work in steel manufacturing, and we’re seeing a significant up-tick in production demand.

      Report Post » Jaycen  
  • Independent4233
    Posted on July 6, 2012 at 5:11pm

    With one sector going up and another going down the situation DOES NOT translate to one cancelling out the other, which has the effect of putting the financial status here in a state of stagnation. It’s not quite apples and oranges, but it’s close.

    Firsrt of all, the housing market might be going up, but it’s because the flood of foreclosures are being sold at bargain prices which hardly translates to signs that that sector of the economy is improving. It is not.

    Secondly, without a solid maufacturing base…or at least an income producing sector that indicates exports are increasing (which they are not) or domestic sales are on the increase (They are not.) …….there is no evidence that can be considered as an overall sign that the economy is improving. The financial picture…in totality….looks weak and is getting weaker, especially with unemployment figures failing to improve, resulting in a downturn in consumer spending

    One really good, overall indicator of economic health is the debt to GDP ratio which is getting greater. Just like the EU which is on the verge of financial and societal collapse.

    Report Post »  
  • Worriedone
    Posted on July 6, 2012 at 4:51pm

    :-0 doh

    Report Post » Worriedone  
  • Bruce01
    Posted on July 6, 2012 at 2:50pm

    Hello…..Rome is Burning!!!! Hello Washington!!! The US is on the verge of another recession and to be followed by Stagflation. Why are we not talking about a comprehensive energy policy, with a tax code overhaul? Everyone is asking for QE3 to have more cash flood the system and create a larger national debt at the expense of commodity pricing going through the roof and devaluing the dollar. We have seen this picture before, and each time the results of this strategy are less and less effective. One last thing… O’Care is a TAX!!!!

    Report Post »  
  • Detroit paperboy
    Posted on July 6, 2012 at 2:28pm

    All of these homes are being bought by wealthy Asians …. Research it………..not young American families…..we are being bought out and sold down the river……….that’s why you have one sector going up and other sectors going down………

    Report Post »  
  • Snowleopard {gallery of cat folks}
    Posted on July 6, 2012 at 1:50pm

    We are in so much trouble; and now China is preparing to tank, as I have warned of for a few years now. India though is worse off then I thought at this time, so which is gone first – China, India, the EU, or the USA?

    Report Post » Snowleopard {gallery of cat folks}  
  • jackact
    Posted on July 6, 2012 at 1:43pm

    Thanks to the US dept of education we have become so stupid that we can be presented any facts or figures and believe it without question. Bad parenting also is a major contributor.
    This is part of true manifest destiny of centrally controlled govt.
    And once we have become too stupid to know any better….
    The ruling class elite wins.
    Turn back the tide.
    Read books.
    Get off your fat asses and make a difference in your children’s lives so that they will not have to suffer the effects of the lies we were told during the last forty five years.
    Only politicians need charts and graphs.
    Leave them alone in their ignorance and hubris.

    Report Post »  
    • caffinated1
      Posted on July 6, 2012 at 2:34pm

      “There are three kinds of lies. Lies, damned lies, and statistics”

      Mark Twain

      Report Post » caffinated1  
    • Bluebonnet
      Posted on July 6, 2012 at 5:07pm

      We’re in real trouble. And to think obama wants another 4 years to finish the job of destroying America. What a narcissist. He has no shame.

      If I had made such a mess, I’d quit and let someone fix my horrid mistakes to save America, but no, he has the nerve to run again?
      I BLAME OBAMA for everything bad that’s happened. Everything he’s touched has turn to crapola. He has no knowledge, no ability and no vision and can‘t repair the damage he’d done in only 3+ yrs And NO, it‘s not Bush’s fault, it‘s Obama’s baby.

      Report Post »  
  • abbygirl1994
    Posted on July 6, 2012 at 1:00pm

    Are you prepared??

    Report Post » abbygirl1994  
  • team1blazer
    Posted on July 6, 2012 at 12:53pm

    When hyperinflation comes (not if, when), all of this will no longer matter. Prepare now, or die in the streets later.

    Report Post » team1blazer  
    • Cavallo
      Posted on July 6, 2012 at 1:10pm

      You’re right. Why anyone thinks we can print that much money and keep interest rates artificially suppressed for so long is denying reality. They think they can grow us out of this problem, but the only way that can happen is for government to get out of the way. They refuse to do that and have now crippled the health industry with even more meddling. They won’t see it until it is too late and violence erupts all throughout the US because their savings, investments, life’s work is now worth virtually nothing. Although.. maybe that has been their plan all along, to then use the military domestically to institute their communist paradise in response to wide spread deprevation and seditionist uprisings?

      Report Post » Cavallo  
    • JRook
      Posted on July 6, 2012 at 1:45pm

      While your predicted hyperinflation may be a problem it is not the longer term issue that is dragging the US and European economies. First, the decline in real wages in the US since 1980, particularly among the manufacturing and service sectors. Twenty five years ago a steel or auto worker could buy a house, raise a family and send his kids to college. They cannot do that today. Decline in real wages will ultimately work its way through the economy with all wages being effected. Witness the people who want to eliminate teacher unions and reduce their wages and benefits. As this happens discretionary spending and consumption will go down. As demand goes down the economy slows and contracts. Second, the increased concentration of wealth pulls money out of the consumption cycle. Wealthy people only need so may houses, cars, boats etc. And their investments are not consumption and do not fuel demand. Again, with less money in the consumption cycle, demand goes down and the economy slows and contracts. Witness the reduced annual cars sales in the US over the past 2 years versus the past 20 years. You see the opposite in China. Real wages in China are going up and since they are at the begging of their economic boom, wealth is not as concentrated. Their wealthy class is still growing and buying things. Demand is up and their economy is growing, other than the impact of our reduced demand.

      Report Post »  
  • NOBALONEY
    Posted on July 6, 2012 at 12:42pm

    Bailouts, quantative easings, and five trillion dollars added to the national debt has brought us to this point; which is just muddling us through. Chairman Ben has no logical exit plan, King Roberts has given his stamp of approval on ObamaCare; which will see some 21 taxes added by 2014-15. President Obama has a free hand with the debt limit, since Congressional leaders have agreed to puting off having a budget until next year. The fuse in real short, there‘s no consistency except in the lies and predictions that there’s a recovery. What happened to the 2010 “Summer of Recovery”? Wall Street, Washington, and the economic and political geniuses have no clue, because this is all unchartered territory. The poison pill has been swallowed by the global economy. Glenn Beck‘s ’Mutually Assured Economic Destruction” is about to become reality.

    Report Post » NOBALONEY  
  • h20sue
    Posted on July 6, 2012 at 12:42pm

    Foreclosed property is the only thing moving in our area. I guess this is what the government thinks is good! We live in a rural area, and trust me there are numberous homes that have been foreclosed. The realty companies are not interested in keeping the grass cut, or upkeep to the exterior of the homes. Who wants to buy homes that look so horrible?
    We’re struggling to keep our home, and it’s a day to day struggle. We depend on manufacturing businesses to purchase or lease our products. These companies are struggling! Payments have been late arriving since 2009! I want to slap the president and ask if he’s living on Mars? The private sector is not doing “fine”, we’re barely making it! He needs to get in “our campaign bus” and visit homes and see what’s really going on, especially rural areas where there are NO FRIG–N JOBS! I dare the man to do this! What an idiot he is to think the “private sector is doing fine.” He doesn’t think before he speaks, just like saying…”If I had a son, he’d look just like Trayvon.” Well, Trayvon didn’t look like the photo handed to the media. Wake up ABC, NBC, and CBS, Why don’t you show the latest photo of Trayvon. The Media is as crooked as Clintons index finger….

    Report Post »  
    • martyinhagerstown
      Posted on July 6, 2012 at 3:29pm

      They won’t stop until you stop them. Ranting may make you feel better but so what?

      Report Post »  
  • hatchetjob
    Posted on July 6, 2012 at 12:33pm

    Nothing in this story matters if and when our monetary system collapses. It’s all spitting in the wind.

    Report Post » hatchetjob  
    • cemerius
      Posted on July 6, 2012 at 12:42pm

      I agree and to think ALL of the News Outlets including Wall Street are waiting with baited breath for QE3 to arrive……..get your wheel barells ready to carry your money…….

      Report Post » cemerius  
  • Virginia Rebel
    Posted on July 6, 2012 at 12:25pm

    They should take a close look at who is actually buying the houses. The foreclosed house next to me was never advertised on the local market. Indeed, no one could even figure out who to contact to buy it. Then some guy in Korea bought it. What international housing market is advertising houses in the U.S.A. to people in Korea? I believe lots of house sales are happening like this, which means Americans aren’t necessarily in better shape to buy houses and our country is being bought out from under us.

    Report Post »  
  • Meyvn
    Posted on July 6, 2012 at 12:24pm

    It’s all by design. Not an accident.

    Report Post » Meyvn  
    • CatB
      Posted on July 6, 2012 at 12:30pm

      Exactly and has been PROLONGED .. by all the spending (give aways) by the government.

      Report Post »  
    • Bluebonnet
      Posted on July 6, 2012 at 5:24pm

      By accident? how many plan to vote for 4 more years of this dismal prez?

      Report Post »  
  • burr99
    Posted on July 6, 2012 at 12:22pm

    Simple is it not?? Nothing changes. If nothing changes. More regulations + higher taxes = A reticent employer/investor environment. And now that Oblameo’s tax has been upheld by another Supreme Court screw up, We can expect more of the same……

    Report Post »  
  • Mike N
    Posted on July 6, 2012 at 12:22pm

    Real estate is climbing because investors can no longer make money in the manufacturing sector, so they are selectively buying into resdential real estate, in hopes that it will climb enough to get out with a profit. Good luck, as there still is too much supply.

    Report Post »  

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