I mean, some of the major indicators are harrowing: the rate of new housing and price of new housing is dropping (but mainly driven down in over-inflated markets like cali and florida, my little neighborhood of West Philadelphia is treading water with a little bump here and there).
What's saved us? Toyota and Wal-Mart. Well, not exactly that company, but the things that make them great: lean thinking. To get what's going on, you have to understand the difference between the construction of supply chains now versus twenty years ago, and much of the change can be attributed to businesses inhaling the notion of lean thinking or JIT (just-in-time) production that was imported from Japan.
So the scenario twenty years ago was that if i was in manufacturing, and i had a couple clients, i would make large batches of products so that i had 'inventory'. Now, i had to make enough inventory so that stuff wouldn't be on back-order for 3 months, so i also had to buy space for this inventory. Now, when my main buyer went out of business, i lost thousands or millions because i had no place to sell my goods.
This may seem bad for A business, but it was even worse for the supply chain. How? Well, i then reduce my orders from my suppliers who feel the same reverberation. But, since i supplied the company that just closed its doors, i also supplied them along with my competitors and other companies who created complementary products. Now, since i got a reduction in orders, also my competitors and complementors did, so OUR supplier is now out not just the business of one business (mine) but multiple businesses (my competition and complementers).
This is a process called amplification. So a disturbance closer to the consumer end of the supply chain, amplifies its consequences down the supply chain. And vice versa . . . when the midwest suffers a drought, all the products relying on corn suffer from higher prices, and lower profit margins.
So what has changed? Wal-mart. Wal-mart got on the IT train real early, and all-in. What they did was set up a system so that their suppliers had real-time access to the current and historical rate of sales of their products. What that meant was that companies instead of creating abstract and guess-based forecasts, they could accurately predict how much an item would sell, and in what seasons, and in what quanitties. So, they no longer had to go through miniature boom-bust cycles for their inventory, they could create a relatively consistent stream of production.
If they then transmit this information to their suppliers, then their suppliers have more realistic information and goals for production. So the amplification factor is minimized or at least reduced drastically due to better communication. Two days ago i saw a graph from another blogger that charted the price of fish in coastal African markets and the volatile fluctuations, until cells phones came in. Now, fishers can call ahead to see the price of fish and can choose to go where the best price is instead of waiting to get all the way to the market and gambling on price. In the graph, the variation was about a third of what it was before!
I remember back in the early-mid nineties when i watched NBR (nightly business report) over my father's shoulder how they would report fluctuations in manufacturing. I would assume that the fluctuations aren't as volatile as before most of the economy started with this IT thing. Now, the situation is far from over, many manufacturing and a few other sectors of the economy are far from investing and/or utilizing their IT departments in such a way as to communicate back through their supply chain, but it is happening, and this fact has enabled the contraction in credit to not adversely affect the rest of the economy. Why? Because you don't need a loan for guaranteed money, you need a loan for speculative money.
Since businesses are relying less on borrowed money for their core production, what's suffering is the creation of new business, not the sustaining of old business. Well, that's my half-pence of analysis anyway
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