Capacity Utilization up in December 2012

The good news keeps coming. Capacity utilization was up in December 2012 for the total industry and hit a 6 month high of 78.8%.

Mining was very interesting as it kept climbing to an all time high of 91.9%, above its historical average of 85%.

The data is what it is and it indicates higher metal prices in the coming months.

Chart 1: Capacity utilization

As an extra we found out that China’s GDP grew to 8%. This is all in line with the positive PMI numbers we got last month. And we all know that China’s GDP consists mainly of production (60%) and consumption of commodities as I pointed out here. So, I expect a higher commodities market and with that a higher stock market, mainly in Asia.

End of fiscal year 2012 Interest Payments

Today marks the end of the fiscal year 2012 for the interest payments on U.S. debt of which I talked about here. It’s surprising that the interest payments have dropped so much in 2012. Probably due to a change in the accounting method for the Department of Defense (DOD) market-based securities, we got a one-time $75 billion decrease in interest payments  in the month of July. Otherwise we would have $435 billion in interest payments.

So, in reality they paid $435 billion, but the reported number is only $360 billion. Just to make it look better.

Chart 1: Interest Payments Vs. Total Public Debt

Capacity Utilization highest since April 2008

Good news for inflationists!

Capacity utilization for July 2012 came in at 79.3 (up from 78.9 a month ago), which is the highest number since April 2008. That also means we are nearing the danger zone of 80. Once we get above 80, you can bet that we will get high inflation after a few months from now.

All different industries were higher in capacity utilization with the mining industry posting an astounding 90.4 capacity utilization rate in July 2012, up from 89.5 a month ago.

There is absolutely no indication that precious metals won’t go higher in the future.

Chart 1: Capacity Utilization

China Gold Imports drop another 10% in June 2012

China Gold Imports have dropped another 10% from the previous month.

Although we see decreasing demand from China for gold, China says it will keep buying more this year as the precious metals market is set to grow throughout the second half of this year. Analysts say physical demand is still strong.

Chart 1: China gold imports from Hong Kong

Instead, China is buying more and more U.S. treasuries.

Chart 2: China U.S. treasury holdings

Capacity Utilization in June 2012 at 78.9%

Good news! The capacity utilization rate for the total industry in June 2012 came in at 78.9%, up from 78.7% a month ago (Chart 1).

Interestingly, the mining industry posted its biggest gain in capacity utilization. Mining had a capacity utilization of 89.4%, up from 89.0 % a month earlier.

So no worries, inflation is still in the game.

Chart 1: Capacity Utilization Rate

China May 2012 Gold Imports from Hong Kong Still in an Uptrend

A little update on China’s gold imports from Hong Kong. For May 2012, China imported 75.6 metric tons from Hong Kong. Pretty disappointing if you ask me, but the trend is still going up. The May 2012 imports are a sixfold increase from a year earlier, but down from April 2012’s record.

Chart 1: China Gold Imports from Hong Kong

U.S. Budget Deficit Worsens

I previously dissected the U.S. deficit HERE. Citing that the U.S. budget deficit is increasing at enormous speeds.

Today, reported on Bloomberg, the U.S. budget deficit widened to almost 200 billion in March. Extrapolation brings us to more than 2 trillion in budget deficits in 2012 compared to 1.4 trillion in budget deficits in 2011.

That’s a 40% increase in budget deficit year over year. Hyperinflation is on the horizon.

Link: http://www.bloomberg.com/news/2012-04-11/u-s-budget-deficit-widened-to-198-2-billion-in-march.html