Here are a couple more boring economic charts. I'm almost done for the day, I promise.
(Almost.)
The first is new orders per capita for capital goods from manufacturers. It just keeps going down and down. Manufacturing is not going to save us.
But here's something a little cheerier:
We've all seen the charts showing that semiconductor companies are spending a lot of money on new construction, but when are they going to actually start producing more stuff? The answer seems to be that they already have. In the middle of 2023 the growth rate of semiconductor output abruptly jogged upward. It's been rising at a 9% annual rate since April of last year.
Here's another economic chart. The hook is that October sales of new cars were released today, but that's just an excuse. What I really want to show you is the long-term trend:
Look at the trendline since that smooths out volatility. On a per capita basis, new car sales have dropped from 57 per thousand people to 44 per thousand. That's a decline of nearly a quarter in 25 years.
Why? There are two likely explanations. First, we're just not as car crazy as we used to be, especially among the young. Second, cars last a lot longer than they used to so we don't buy new ones as often.
Donald Trump's playbook appears to be pretty simple. Internationally, he threatens big tariff increases if countries don't do what he wants. Domestically, he threatens to cut off federal spending if states and cities don't do what he wants.
This is of dubious effectiveness in the case of tariffs and of dubious legality in both cases. In any case, his latest attempt at extortion is aimed at sanctuary cities:
President-elect Donald Trump’s advisers are discussing how to unilaterally strip federal resources from Chicago and other Democratic-run cities if they refuse to participate in deportations of undocumented immigrants next year, according to three people familiar with the conversations.
....Trump vowed mass deportations during his campaign — eliciting fierce pushback from some Democratic mayors in “sanctuary cities” and governors in blue states, some of whom are already promising to defy the president-elect’s pledges. He tried to slash funds to those jurisdictions in his first term, but with only limited success, and any similar effort in his second term could also run into roadblocks.
"Not a cent," said Vivek Ramaswamy over the weekend. That's unlikely in the extreme, but Trump could make states and cities waste hundreds of millions of dollars in legal fees along the way.
If we were dealing with someone more rational, you might figure a compromise could be worked out. Maybe the funds at risk could be limited to those related to immigration. And perhaps Trump could agree that the most important thing is for cities to turn over violent criminals for deportation, not the poor schlubs who just happen to be in the wrong place at the wrong time.
That would make a big difference. Most sanctuary cities refuse to use local police to do the federal government's bidding, but they don't withhold every speck of cooperation. In particular, they generally hand over violent criminals to ICE for deportation when their sentences are up. You can see this in the results of a study from the National Academy of Sciences:
The top panel shows what happens to illegal immigrants with no criminal convictions. When a city adopts sanctuary policies, deportations go down significantly.
But the story is entirely different for violent criminals: There's no change before and after. Woke or not, everyone agrees it's a good idea to deport genuine bad guys.
It's also worth noting that most places don't adopt sanctuary policies just to thumb their noses at Donald Trump. They do it because maintaining law and order is easier if illegal immigrants aren't afraid to talk to the police. A highly public sanctuary policy assures everyone that they can call for help or answer questions without fear that a cop will decide to haul them in and turn them over to ICE. You may disagree on balance, but there really is a reason for this stuff.
More charts! And there are more to come. Today was busy. First up is disposable income, which is basically income minus taxes:
Adjusted for inflation, DPI was up a healthy 4.5% last month on an annualized basis. For the entire past year it was up 1.9%. We're still below our pre-pandemic growth rate, but maybe starting to catch up?
Anyway, for you and me this is good news. For the Fed, maybe not.
Remember that Chinese bulk carrier suspected of cutting a couple of internet cables in the Baltic Sea? Apparently it's now a pretty open-and-shut case:
Investigators have established that the ship dropped anchor but remained under way in Swedish waters on Nov. 17 at around 9 p.m. local time. The dragging anchor cut the first cable between Sweden and Lithuania shortly afterward, according to two people familiar with the investigation.
During that time, the ship’s transponder, which charts its movements on the so-called Automatic Identification System, shut down in what is known as a “dark incident” in marine traffic jargon. The ship then continued even as the dragging anchor greatly reduced its speed, according to satellite and other data reviewed by investigators.
Investigators say that at around 3 a.m. the following day, having traveled about 111 miles, the Yi Peng 3 cut the second cable between Germany and Finland. Shortly afterward, the ship started zigzagging, raised anchor and continued. Danish Navy ships then set out to pursue and intercept the Yi Peng 3, ultimately forcing it to anchor in the Kattegat Strait, which connects the Baltic and the North seas.
The current belief is that China had nothing to with this. It was a rogue captain who was bribed by the Russians to do it. Oddly, although the ship's owner is "cooperating," the captain of the ship hasn't been questioned. Ditto for a Russian sailor onboard.
Oh, and this is the second time this has happened recently:
In October last year, a Chinese-registered vessel called Newnew Polar Bear cut the Balticconnector gas pipeline and a telecommunication cable connecting Finland and Estonia with its anchor, according to people familiar with the investigation into the case. Some officials briefed on the investigation said Russian sailors were aboard the Chinese ship at the time of that incident.
Newnew Polar Bear was allowed to proceed toward Arctic Russia because authorities in Sweden, Denmark and Norway didn’t want to halt the ship without sound legal backing, according to officials.
Sound legal backing or no, the Scandinavians have apparently had enough: "The Chinese bulk carrier is now guarded by a small flotilla of North Atlantic Treaty Organization ships belonging to Denmark, Germany and Sweden."
Both the headline and core rates of PCE inflation were up last month:
On a conventional year-over-year basis, headline PCE was up 2.3% and core PCE was up 2.8%. Both are higher than they were in September. Sadly, this is the kind of news likely to convince the Fed that "the fight against inflation isn't over," and therefore they should hold off on further interest rate cuts.
Just for the record, I want to remind everybody what Donald Trump said about the new USMCA trade deal with Canada and Mexico back when he signed it:
We have negotiated this new agreement based on the principle of fairness and reciprocity.... This is a terrific deal for all of us....This new deal will be the most modern, up-to-date, and balanced trade agreement in the history of our country.... With this agreement, we are closing all of these terrible loopholes. They’re closed. They’re gone. They were a disaster.... We are requiring a large portion of every car to be made by high-wage workers, which will greatly reduce foreign outsourcing.... This deal will also impose new standards requiring at least 75 percent of every automobile to be made in North America.... This landmark agreement will send cash and jobs pouring into the United States.... We formed a great partnership with Mexico and with Canada.... It’s a fair deal for everybody.
Huh. I guess he no longer feels quite the same way.
There have now been 126 chargers built using NEVI funding. The first chargers built using CFI funding also went up last quarter, including a mega-station in Washington state, for a total of 210 chargers, triple the 69 that were finished by last quarter.
At the current rate, we'll have more than a thousand charging ports built by the first quarter of next year. The ultimate plan is to build 500,000 charging ports across 100,000 stations by 2030.
Mexico says they'll retaliate if Donald Trump levies a 25% tariff on everything we buy from them. But retaliate how? What do they buy from us?
In fact, they buy about $300 billion worth of goods from us every year. Here are the US industries that would be hurt the most if Mexico levied broad retaliatory tariffs on us:
If you work in one of these industries, you should probably be a little wary of Trump's tariff threats.
But here's something a little cheerier:
We've all seen the charts showing that semiconductor companies are spending a lot of money on new construction, but when are they going to actually start producing more stuff? The answer seems to be that they already have. In the middle of 2023 the growth rate of semiconductor output abruptly jogged upward. It's been rising at a 9% annual rate since April of last year.
