"No warning can save people determined to grow suddently rich" - Lord Overstone

  • 8 hours The Biggest Winners Of Q2 Earnings Season
  • 1 day Experts Suggest A Gold Shortage May Be Looming
  • 2 days The World Is Drowning In $247 Trillion Debt
  • 2 days Tightening Immigration Policy Could Hurt The Tech Sector
  • 2 days The First Bitcoin ETF Might Be Just Months Away
  • 2 days U.S. Rent Costs Hit All-Time High
  • 3 days European Allies Plan To Continue Trade With Iran
  • 3 days Bitcoin Bounces Off Key Resistance Level
  • 3 days These 3 Industries Are Immune To The Trade War
  • 3 days Is This The Answer To The Looming U.S. Healthcare Crisis?
  • 3 days UK Regulators Hit Facebook With £500,000 Fine
  • 3 days Tesla’s U.S. Tax Credit Coming To An End
  • 3 days Ex-Goldman Banker Caught In A Billion Dollar Fraud Scandal
  • 4 days Investors React To Escalating Trade War Drama
  • 4 days The Three Horsemen Of The Bitcoin Apocalypse
  • 4 days 10 Countries Feeling The Heat As The Trade War Escalates
  • 4 days The Exorbitant Cost Of Getting Ahead In Life
  • 4 days $1,000 Investment Bible Leaked For $10
  • 4 days The U.S.-Chinese Race To End All Privacy
  • 4 days Gold And Silver Struggle As Sentiment Shifts

Empire State and Philly Fed Reports Positive: Worst Over for Manufacturing?

On Tuesday, the Empire State manufacturing region returned to positive territory following seven months of contraction.

Today, the Philadelphia Fed manufacturing region returned to positive territory following five months of contraction.

Is the worst over for manufacturing or is this simply a breather?

Let's start with a look at the Empire State and Philadelphia Fed reports.


Empire State

Empire State 2016-03-14A

The headline general business conditions for the Empire State region climbed seventeen points to 0.6, its first positive reading since July of last year. The new orders and shipments indexes rose well above zero for the first time in several months, pointing to an increase in both orders and shipments. Labor market conditions were little changed, with employment and the average workweek holding fairly steady.


Empire State Details

That's quite an improvement in the New York region. Let's turn to Philadelphia.


Philly Fed Index

Philly Fed 2016-03-16


Philly Fed Details

Philly Fed 2016-03-16A


Fundamental Change?

Here's the key question: Do these reports represent a fundamental change?

I suspect not, for numerous reasons:

  1. Slowing retail sales (See Retail Sales Down, January Sales Revised to -0.4%)
  2. Inventory-to-Sales reports that look horrific (I will report on that later today)
  3. CEO hiring expectations (see 38% of Companies to Reduce Employment in 2016, Only 29% Expect Increase: Five Consequences)
  4. That 82.8% Expect Real Incomes Will Decline in 2016.
  5. The global economy still looks anemic.
  6. The US dollar, although starting to fall, is strong enough to hamper exports.

In regards to point four, It's not just the consumer expectation of falling real incomes, Obamacare premiums and rising rents nearly guarantee that outcome.

So why the jump? Things don't fall or rise forever. I had actually been expecting a jump; I just did not know when. This was the month.

Orders get put off, and off, and at some point they have to rise, from very depressed levels. Stabilization or even slight improvements from here do not represent good times for manufacturers.

This bounce looks good, but it must be viewed in light of falling orders for months on end that had to turn at some point, for a while.

 

Back to homepage

Leave a comment

Leave a comment