Actual industrial output has been far weaker than the regional Fed manufacturing reports and the ISM report for at least a year.
Yesterday we heard from the Empire State region. Today the spotlight is on the Philadelphia Fed Business Outlook Survey where new orders plunged.
Econoday notes “cracks” in the survey.
There finally may be cracks appearing in Philly Fed which has, since the election, been signaling break-out strength for the Mid-Atlantic manufacturing sector. The general conditions index looks solid at 19.5, still very strong though down from 27.6 in June and the least robust result since November. But details — which in this report are not reflected in the headline index — are the flattest since late last year.
New orders, at only 2.1, are down more than 20 points in the month for the worst reading since August last year. Unfilled orders show better strength at 7.2 but are still the weakest since December. Employment, at 10.9, is also the softest since December as are selling prices, at 9.0. Shipments, still strong at 12.2, are at the lowest rate of month-to-month growth since September last year with the workweek, still positive at 3.8, the lowest since November.
This report has been a puzzle all along, signaling post-election strength that was not matched at all by the national factory sector where growth has been no better than moderate. Though indications in today’s data still point to growth, they definitely are pointing to slowing which could either signal that this report is falling into line with actual national growth or, possibly, that national growth may be pivoting lower. In any case, this report is based on a small volunteer sample from only one area of the country.
Survey Results vs 6-Month Lookahead Expectation
New orders, inventories, and the average workweek are all showing relative weakness. But check out the six-month look ahead component.
Only 4.3% of firms expect more hiring while 39.4% expect more new orders and 25.8% expect to build inventories.
Look Ahead Expectations
The look-ahead expectation is always a joke. It’s only real use is as a contrarian indicator. During recessions it turns negative, marking the bottom.
Ahead of this report, Econoday was actually worried about overheating. Given these reports had nothing to do with actual output, the concern was more than a bit silly.
For a discussion of the weaknesses in diffusion indices and the recent Empire State report, please see Empire State Manufacturing: Another Strong Regional Report Bearing Little Resemblance to Reality.
Expect more cracks in the coming months.
Mike “Mish” Shedlock
Global industrial output is on the wane, over production can only mean one thing: depression, if we can’t sale we can,t make a profit so we close shop. In the exchange game there is always one loser and one winner. The winner takes all and we all lose including the winner.
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Look at Philadelphia Fed survey on FRED chart GACDFSA066MSFRBPHI.
link: http://bit.ly/2vnPwzs
It is cyclical and coming down from a high of 43.3. It is no where near a danger zone.
Someday, a high number of datum will go down together creating a harmonic that feeds on itself and will change economic and investment sentiment. Right now with credit expansion being sufficient, I don’t think such a shift is imminent. When? I hope to see it coming.
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Their leveraged financialization on the economy is coming to an end.
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So yesterday i found out for the 30th or so year in a row, my employee contributions to my medical insurance is going up while my coverage is going down. Outside of housing and health care, it’s a wonder people can afford to buy anything.
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The business of the US is business and business will never rule in favor of the working people,profit not fairness is the game.
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A large number of people are one down click from suicide, so a recession should relive demand and prices for health Care. After all, when the lure of “something for nothing” is gone, is there any reason to want to live?…. Sarcasm….sort of.
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Now that Donald has taken “credit” for the stock market bubble its time to pull the plug. This is just the water swirling in the bowl before it goes down the drain.
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The US economy is stuck in a slow growth environment for the foreseeable future. I do not foresee a crash or depression. The stock market is a bit overvalued, but nothing ridiculous. Pretty boring actually. But I’m a fan of boring. Not a fan of a depression.
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Shiller PE > 30
http://www.multpl.com/shiller-pe/
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After years of stock buy backs, corporations are caught saddled with debt and the Fed is raising interest rates. Get ready for the corporate begging mode when the customer base trims their buying habits.
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“After years of stock buy backs, corporations are caught saddled with debt”
…
Yes
Some stock holders have nary a clue how leveraged … some will find out … the hard way, of course.
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Sometimes I read things here and want to cry.
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After more than a decade of over-use of steroids and artificial stimulus, G7 economies are starting to experience ‘roid rage.
Plenty of people saw this coming and told Bernanke he is a horse’s @ss, and his grey haired groupie too.
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Steroid or hemorrhoid?
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Is it a hemmoroid or a asteroid… always get them mixed up. Phoneic associations are a bitch.
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Everybody, including the experts, keep talking about all the ways the economy just keeps on getting weaker. The consumer keeps getting hit with higher healthcare costs, rents r up car payments up, credit card debt all time high, all insurance costs are up, student loans are up as many use these loans to purchase a new car or make payments on credit card debt. Good jobs are hard to find while many keep getting layed off. Despite all this and a move towards a recession, even as the economy keeps getting weaker, I think before the equity markets collapse, we’re going to have a massive melt up that will absolutely break all the bears and short sellers. Not many are expecting this Mish. I wonder if u will post this .
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Auto loans, home equity loans and credit cards have been used to blow a huge bubble for the past 8 years. State and local government spending has raced ahead while pension liabilities climb out of sight. Limits are being reached as we see at malls, department stores and restaurants.
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Federal Reserve cheer leading takes priority over truthful economic data.
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In hindsight it is clear what happened. The thrill of a Trump figure as president who would reflate the economy saw a rise in expectations. Orders and production was ramped up and this was reflected in the soft surveys. Now that this expectation has been replaced by disappointment, the soft surveys have come down with a bump. This has consequences. If production and orders were artificially higher in the first half of the year, they will have to be cleared in the second half making for an even softer outlook.
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