A Glimpse of More Economic Pain to Come

I was looking at some just-released (2/2/2009) leading economic indicators, and sure enough, construction spending is declining across most industries. This is not a surprise. Also not surprising is the slow but steady increase in spending in certain segments: healthcare, public safety, and sewage and waste disposal.

The result that suggests that there's more pain to come was this: manufacturing construction was consistantly increasing over the last four months of 2008. Since manufacturing construction projects tend to be highly capital-intensive, are sometimes scheduled years in advance, and are often more than a year in their completion, this means we're still expanding our structural capacity to produce products in a time of recession and declining consumer and corporate spending. This is not a good thing.

Couple this with the recent news of increasing inventories, and we may be due for even more layoffs and more contractions in corporate spending in the near future, as the supply of products and the infrastructure to make them continues to diverge from the demand for those products and the demand for manufacturing capacity.