Expectations for the Empire State Manufacturing report were for a continuation of last month’s strength. Instead, the report disappointed with a dip to barely above contraction.
The Empire State Survey is the first of the Fed regional surveys that come out each month.
Let’s take a look at the report vs. the Econoday Consensus estimate of +5.00.
Highlights
The first anecdotal report on the factory sector for the month of July is not very promising as the Empire State index barely held in the plus column, at 0.55 vs 6.01 in June and minus 9.02 in May. New orders, after jumping to 10.90 in June, are down 1.82 in this month’s report. This combined with yet another contraction for backlogs, at minus 12.09, do not point to strength ahead for other readings. Employment is one of these readings and, after coming in at zero last month, is at minus 4.40. The workweek is also negative as are inventories which continue to contract. Price data are mixed, showing steady energy-related pressure for inputs but no life for selling prices. The factory sector has been up and down this year on a trend that is dead flat. Watch for the industrial production report coming up this morning at 9:15 a.m. ET. It will offer the first definitive data on the factory sector for the month of June.
Recent History
The Empire State index has been trying to get into the air, posting a plus 6.01 in June for the third positive reading in four months. Forecasters see more of the same for July, at a consensus plus 5.00. New orders came in at a strong 10.90 in June which points to general strength through the July report. This report will offer the first anecdotal look at the immediate effects, if any, from Brexit on the U.S. factory sector. Of special interest will be the 6-month outlook which, at 34.84, was at its best level of the year in June.
6-Month Outlook
Why anyone would care about the 6-month outlook is nearly beyond comprehension. It has been ridiculously optimistic for something like forever. It’s only possible use is as a contrarian indicator. At major lows when the 6-month outlook hits negative, bottoms are at hand.
As for the idea “New orders came in at a strong 10.90 in June which points to general strength through the July report“, well… No.
One month bounces don’t point to anything.
Mike “Mish” Shedlock
Could it be that consumers need incomes and that the government-subsidized usury cartel and the most so-called creditworthy, the rich, have contrived to deprive them of it? Via automation and outsourcing financed with the workers’ and general populations’ own legally stolen purchasing power?
And now the chickens are coming home to roost? Proving once again that God is not mocked?
Just so it all stays in the green, all will be well.
What????? What?????
Democrat Election Year Politics?????
Cooking the Books Again?????
The FED being a “data-driven” clone of the old Supreme Soviet, with market rates being set Bolshevik style, all concerns at this point in time must necessarily be more political than economic. I would interpret all these data points in that context:
With a Democratic operative/ally of the White House at least nominally in charge at the FED, the imperative is the November election. So, I would expect all this to factor into no rate increase and more money creation. Maybe some internal compromises at the FED, to give those wanting rate increases their wishes AFTER the November election. I think these people could care less about the real economy, except in so far as their varied personal agendas. For now, it is the election and manipulating a “positive” mirage/illusion as a backdrop for the sake of the Party, comrades.
Normally, I don’t give a hoot about Fed analyses, or any other, really. But especially Fed. They can’t manage interest rates, balance sheet levels, or forecasts with competence. So why should these reports be of any value?
I actually looked at this one and saw meh. Not great. Certainly not bad. Just likely good sailing ahead.
Since so many have used Fed analyses in the past and forecast doom – and doom does not seem to be here yet – I would expect doom is not going to be here soon – assuming the past can be used to forecast the future using these reports and their respective analysis over time.
These reports reflect Fed featherbedding. The FOMC appears to ignore them. The investment community appears to ignore them. Bloggers show a little interest. I never read them and don’t intend to except on extremely rare occasion. The FOMC and Federal Reserve System is a jobs program for otherwise unemployable econ majors.
The FOMC will continue to do what Obama told them to do (not raise rates). Not only that, they will not raise rates out of a sense of self preservation. If they do, they will be reminded of their total incompetence on an international scale. Artificially inflated assets values will fall. Pundits will shriek “I told you So, please stop.” These will be the same pundits who hand wring over artificially inflated asset prices. Heaven protect then from 401k savers who fell for it again.
Whatever these report say today or on any day will be ignored by the FOMC. Whoever sits on the board next will have to deal with these problems. The current crew is running down the clock out of a sense of self preservation. Them before us. Any reason to do nothing is a good reason. They will get to blame the next bunch, whoever gets appointed down the road, just like the business reporters and pundits will, unless the next crew is as cowardly and as professionally incompetent and as derelict in their responsibilities as this bunch.
Whoever scammed the FOMC and other world Central Banks into favoring Bernanke’s free money forever ideology – if it fails it’s not big enough or for long enough idiocy – or – negative rates to an economist are just poof in the big picture – won the game and broke the bank. These reports are fake window dressing. Nothing will change no matter what they say, unless it supports more free money in larger quantities for a longer time. Then bazooom. More money, lower rates, forever. They won. Completely. It’s the new normal.
Ignore these reports. They’re a total waste of time and just part of the industry that adds credibility to the free money forever business. The establishment won and has control.
Behold the Problem of Plethora!
Six hundred friggin billion dollar DEFICIT and ITS TIME TO BUY TREASURIES BITCHEZ!
I mean TRULY…you can’t make this up.
Name one single productive asset in the ENTIRE US economy right now.
If you say “THE TERRORISTS!!!” you are WONG!
You are TOTALLY WONG!
AND TOYOTA AND HONDA AND SAMSUNG TOO!!!
Student debt? 🙂