Thursday, July 17, 2008

Manufacturing Not Looking That Hot

One of the areas of the economy the NBER looks at when determining a recession is the manufacturing sector. This week we've gotten the Empire State and Philly Fed releases. Neither have been good.

Here's a chart from Econoday of both numbers:

From the NY Fed:

The Empire State Manufacturing Survey indicates that manufacturing activity in New York State worsened for a third consecutive month in July. The general business conditions index increased slightly from last month’s level but, at -4.9, remained below zero. The new orders and shipments indexes both rose into positive territory, while the unfilled orders index was negative and drifted downward. The inventories index fell to its lowest level in a year. The prices paid and prices received indexes both reached record highs, and the employment indexes dipped below zero. The future general business conditions index fell sharply, reaching a level not seen since September 2001.

There is a bit of good news in here with the increase in new orders and shipments. However, the record high level of prices paid and prices received indicates inflation is present in the system at uncomfortable levels. In addition, the employment indicator is negative -- another indicator the NBER looks at when dating a recession.

From the Philly Fed survey:

The region’s manufacturing sector continued to contract this month, according to firms polled for the July Business Outlook Survey. Indexes for general activity, new orders, shipments, and employment were all negative again this month and little changed from their readings in June. Despite the overall weakness in current activity, slightly more than three-fourths of respondents reported cost increases this month, and more than one-third reported higher prices for their own manufactured products. The region’s manufacturing executives remained generally optimistic that manufacturing conditions will improve over the next six months.

Activity is down and prices are up. Isn't that just wonderful news....

Seriously -- things aren't looking that hot right now and haven't for some time.