Part of the problem with the graphical presentation is that the
shipped and new orders scale is quite different than the unfilled
orders scale. For the former, 1 division is about 10% while for the
latter it is 7 percent.
Most of the time “new orders” (the green dots) are most often below
“shipments.” How can one ship more (in dollars) than is ordered over
a long time scale (15 years)? Even without going to the original data
on a spread sheet, one can see that the eyeball average difference is
just a few percent. Then consider that unfilled orders (back ordered
goods) are 3 to 4 times greater that than shipments, which reflects
the time lag between orders and shipments (i.e., the length of the
pipeline), it is easy to see that shipments should exceed orders
because of inflation; that is, the prices of delivered goods have
been increased to cover inflation. When the economy turns downward,
inventories increase (relatively) and an increasing percentage of
orders are filled immediately. But because the shipped goods come
from inventory, shipments should exceed new orders until inventory is
reduced to the minimum. The effect on the “booked to billed” ratio
today is unusual because of actual deflation in producer prices.
The ratio of back orders to shipments was around 3 in 1994, 2.6 in
2000, went to 3.9 at its peak in 2008, and is 4.3 today. The recent
high numbers suggest that the pipe line is considerably longer in the
last half of 2008 and today than in years past. Since inventory
dumping dominated 2009, the only reason I can see for the long lead
times is the extensive and bone deep cutting of the work force.
The Advance Report released October 28, 2009 said:
“Nondefense new orders for capital goods in September increased $1.3
billion or 2.5 percent to $53.6 billion. Shipments increased $1.2
billion or 2.2 percent to $56.6 billion. Unfilled orders decreased
$3.0 billion or 0.7 percent to $419.6 billion. Inventories decreased
$2.3 billion or 1.7 percent to $132.4 billion.” <http://
www.census.gov/manufacturing/m3/adv/pdf/durgd.pdf>
This amounts to saying that orders increased right along with
shipments while unfilled orders hardly changed. Inventories dropped
significantly. It is possible for customers to cancel large orders,
causing unfilled orders to drop immediately while all the other
numbers could remain unchanged. But this does not seem to be
significant in our case.
My conclusion remains the same; we are observing an pronounced
increase in the time it is taking to fill orders either because of a
short work force or in problems getting tools and materials (likely
due to credit problems) or both. Thus the velocity of capital
circulation drops and as a direct result, the rate of profit drops
with it.
--rod
===========
On Nov 5, 2009, at 7:38 PM, S. Artesian wrote:
> Interesting question-- I think we need to look at the components of
> capital's recovery after 2003-- and those components were
> depressing wages
> below the year 2000/2001 level, and rigid restrictions on capital
> spending,
> and replacement. Values of fixed industrial assets actually
> decline in the
> US until 2006, when corporations, cash richer than rich, decide to
> resume
> capital spending, just in time to ride the rate of return on its
> way down.
>
> If the "liquidationist" recovery fo 2003 is an accurate
> representation then
> we can see the unfilled order path in this graph as representing the
> "opening up" of the corporate capital investment account to replace,
> improve, capital goods that had been starved of such expenditures.
> This
> really takes off in 2006 and goes hyper in 2007. The bourgeoisie,
> then,
> invest themselves, right out of the "good times," which on close
> inspection
> aren't all that different from the bad times.
>
>
> ----- Original Message -----
> From: "guava tree" <[email protected]>
> To: "David Schanoes" <[email protected]>
> Sent: Thursday, November 05, 2009 8:29 PM
> Subject: Re: [Marxism] The Roots of the Pale Green Shoots
>
>
>> A lot of that CBE data leads to a graph that looks like this which
>> charts advance durable goods shipments, new orders and unfilled
>> orders: (warning, PDF!)
>>
>> www.newyorkfed.org/research/directors_charts/pi_10.pdf
>>
>> What needs explaining to me is how from 2005 to 2008 new orders and
>> shipments are staying relatively flat while Unfilled Orders start to
>> rise to a great degree. This is manifested, I think, by the fact that
>> the green dots of "new orders" in this period are on average *above*
>> (greater than) the blue "shipments" line. From 1994 to about 2004,
>> this was reversed with shipments mostly outpacing new orders
>> (although
>> you can also see a rise in new orders relative to shipments in the
>> 90s--which leads to the rise in unfilled orders in the 90s until
>> 2001).
>>
>
>
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