Factory Orders Weak, Stock Markets Bleak

February factory orders rose by less than what analysts had expected, and excluding continued strength in the civilian aircraft sector, factory orders actually fell, the Commerce Department reported on Thursday. Forecasters' projected rise of half-a-percent proved overly optimistic, with the actual number coming in at a meager two-tenths of a percent growth, exactly the same as the revised January rate.

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The ratio of inventories to shipments indicates how long it would take businesses to wipe out all of their inventories. A rise in this number indicates that demand for final goods is not keeping pace with production, giving evidence of a weakening economy.

  Taken together, the first two months of 2005 give evidence of a broadly anemic economy where only a few sectors are experiencing any appreciable health. Factoring out non-defense aircraft, business spending eroded sharply in February, with orders for capital goods dropping by 1.7 percent, a hard turn-around from the nearly four-and-a-half percent rise in capital goods orders for January. According to Commerce Department data, the ratio of inventories-to-shipments rose from 1.23 months to 1.25 months.

Stocks went down across the board, today, with the NASDAQ composite index once again slipping below the 2000-point mark that it had broken fractionally to the upside on Wednesday, giving some technical traders reason to call yesterday's test of the air above the 2000 level a failure that could signal a sustained period below it. Both the blue-chip index of 30 industrials and the NASDAQ composite index lost about a third of a percent on Thursday.

In consumer news, gasoline prices are now at a record average level in the United States, standing just shy of $2.16 a gallon, according to AAA.

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In national income accounting, "personal income" is national income plus net transfer payments from government minus money attributed to consumers but not received by them (like corporate retained earnings).

  The Commerce Department reported Wednesday that personal income rose in February by three-tenths of a percent, leading some news media outlets to bray about the turnaround from January's drop of two and a half percent. However, the rising price of gasoline in February was partly responsible for a rise in a measure of inflation at the consumer level called the PCE index, which registered a gain of three-tenths of a percent for the month. Although the PCE index is not as widely reported as the more famous consumer price index, the PCE is favored by some economists.

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Even though Federal Reserve Chairman Alan Greenspan says he prefers to look at the consumer price index (CPI), net of food and energy costs, to measure inflation, other economists consider the personal consumption expenditure (PCE) deflator more comprehensible and reliable.

  The fact that consumer personal income and the PCE index measure of inflation rose by exactly the same amount means that, in real terms, consumer income was flat for the month of February, showing no growth at all. Although traditional, simplistic measures of the economy, like GDP, still show positive growth, more complicated, subtle numbers not well reported by the mainstream press are sounding warning bells that significant underlying weaknesses are beginning to spread, which could point to a recession that will appear to be a surprise to those who follow only the numbers that the press reports in its efforts to keep matters simple for a population that doesn't care for issues that require some degree of intelligence exceeding that of the national leaders they choose.