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News Link • Economy - Economics USA

"Companies That Are Very Profitable Still Behaving As If Bankruptcy Is Around The Corner"

While the miss in the April Chicago PMI was just as we predicted, with the final read of 67.6 below "expert" expectations of 68.2, and down from a near record 70.6, it seems that the full pain will only be felt yet. The reason: "In response to special questions about the Japanese disaster, panelists reported minimal impact." They will. Guaranteed. Which means that upcoming weakness is simply deferred from April to May or later, pushing back the "imminent" rebound further into the future, yet guaranteeing a major miss in Q2 GDP. Our call continues to be for a Q2 GDP of at or below 2%. Yet the most insight as usual comes from the survey respondents, where we find this pearl of wisdom which probably explains everything that is wrong with the economy: "Companies that are very profitable still behaving as if bankruptcy is around the corner". And why wouldn't they: when in the history of human events has central planning every worked? Survey responses: 1. Companies still skittish and intense pressure from boards / stock market. Companies that are very profitable still behaving as if bankruptcy is around the corner. 2. We are continually finding and hiring qualified new employees. We are also adding new equipment. The backlog is now over our levels prior to the recession. 3. It appears suppliers are finding more creative ways to institute price increases with the most recent being ---unprecedented surcharges. 4. Prices on plastic resin and cotton continue to press suppliers to the point where they are increasing prices or refusing business - first time I've seen this in years. 5. First price increase to customers due to the commodity pressure on steel, copper and aluminum. 6. Due to our company using products with an asphalt base, we expect to see continued increases throughout the construction season. 7. All costs are increasing. Chemical costs are at recent time highs. 8. Capacity issues at suppliers were exacerbated by the tragic events that unfolded in Japan.

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