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The Market Ticker – Richmond Fed: The Suck Continues

Wed, Aug 24, 2011

Economy and News

From The Market Ticker

So it wasn’t just Philly…..

Manufacturing activity in the central Atlantic region pulled back in August after stalling in July, according to the Richmond Fed’s latest survey. The index of overall activity was pushed lower as growth in new orders and shipments declined further into negative territory. Employment remained in positive territory but grew at a pace below July’s rate. Other indicators also suggested weakening activity. District contacts indicated that backlogs and capacity utilization continued to contract, while delivery times turned negative. Moreover, manufacturers reported that inventory building remained on pace with July.

Looking ahead, manufacturers’ optimism regarding future business prospects dropped considerably in August. An increasing number of firms anticipated slower growth across the board for all future activity indicators.

That ain’t good.  How bad is it?  Let’s look:

There’s no good in here.  New orders and shipments had been mildly negative, but now are severely underwater.  Backlog has collapsed as has capacity utilization.  While employees has not yet gone negative, workweek has, which fits with capacity slack, and layoffs are next – probably imminently if not happening right now.

Prices paid .vs. received haven’t calmed down much at all.  In fact, the latter seems to imply some material pushback in July and August.  The amusing part of this picture is that forward expectations on received prices continue to advance.  Those better turn into realization rather than disappointment, or we’re in big trouble.

Ditto on the rest – it appears we have the Unicorn brigade out in force in the six month expectations, unlike Philly.  Again, the belief in a “temporary and small soft patch” is good, but if it turns out to be unrealized, well, then it’s bad.

Very bad.

The best summary is this: It sucks now but we expect a better tomorrow.

You choose what to believe.

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