Courtesy of Mish.
More weak economic reports came out today. Let’s take a look at two regional manufacturing reports.
Philly Fed Region “Weak but Stable”
The Bloomberg Economic Consensus for the Philadelphia Fed Business Outlook Survey was 8.0. Economists got the leading sign correct, but the consensus estimate was a tad high with the index posting 6.7.
Activity in the Mid-Atlantic manufacturing sector is slow but stabilizing, based on the Philly Fed’s general conditions index which came in at 6.7 for May, down slightly from 7.5 in April and against Econoday expectations for 8.0.
The best news in the report is a slight uptick in new orders, to 4.0 from 0.7. This isn’t searing but is at least in the plus column as are shipments, at 1.0 from minus 1.8. Employment, at 6.7, is also in the plus column.
Manufacturers in the region are reporting significant price contraction, especially in costs which is a surprise given the rise underway in oil prices. Manufacturers are also reporting declining prices for finished goods as well. These inflation readings, if repeated in subsequent reports, will give the edge to the doves at the Federal Reserve.
A plus in the report is a healthy reading of 33.9 for the 6-month outlook, down only slightly from April’s 35.5 and up from 32.0 in March. The manufacturing sector, hit by weak exports and trouble in the energy sector, has yet to find its footing this year but this report, which is very closely watched, points to stability that in turn hints at a rebound in the months ahead.
Weak Demand
In light of rising energy prices, price contraction especially in finished goods tells the real story: very weak demand.
The six-month outlook is meaningless. Such readings are perpetually overoptimistic except at the bottom of recessions.
Industrial production will go nowhere with readings like these. I suggest things appear to be “stabilizing” before the next decline.
Philly Fed vs. Industrial Production
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