Re:Global economy is probably in recession
by dcolkitt on Friday August 09, 2019 @01:00PM
(#20656195)
> Services and healthcare are huge parts of the economy, are our indicators still as valuable?
That's true. But the value of manufacturing doesn't necessarily come from its total share of the economy, as much as it does from its fast responsiveness.
Many services, both on the business and consumer sides, tend to be locked in for fixed contact terms. They also tend to be lumpy, either you buy the service or you don't. In contrast, most goods are purchased on-demand at the time they're needed. And it's easier to cut back gradually over time, by purchasing smaller quantities.
Think of the difference between Netflix and Amazon. Netflix is purchased in monthly increments. It's also all-or-nothing. If a household's belt-tightening they might not cancel their streaming service until they're well into the contraction. In contrast they'll probably immediately dial back how much plastic crap they're ordering from Amazon almost immediately.
So, even if manufacturing was only 1% of the overall economy, the high and fast responsiveness of its output to economic conditions makes it a good canary in the coal mine for the rest of the economy.
That's true. But the value of manufacturing doesn't necessarily come from its total share of the economy, as much as it does from its fast responsiveness.
Many services, both on the business and consumer sides, tend to be locked in for fixed contact terms. They also tend to be lumpy, either you buy the service or you don't. In contrast, most goods are purchased on-demand at the time they're needed. And it's easier to cut back gradually over time, by purchasing smaller quantities.
Think of the difference between Netflix and Amazon. Netflix is purchased in monthly increments. It's also all-or-nothing. If a household's belt-tightening they might not cancel their streaming service until they're well into the contraction. In contrast they'll probably immediately dial back how much plastic crap they're ordering from Amazon almost immediately.
So, even if manufacturing was only 1% of the overall economy, the high and fast responsiveness of its output to economic conditions makes it a good canary in the coal mine for the rest of the economy.