- by New Deal democrat
As I’ve reiterated several times this month, the two items of information I am paying the most attention to in the absence of official federal economic data are the Regional Fed Banks and the ISM, for both of their manufacturing and services reports. I should add that earlier this week ADP said that it would make its valuable weekly employment reports available to the public with a two week delay for the duration of the shutdown.
Yesterday I wrote about the Regional Fed manufacturing reports. Today I am following up with the service sector reports. The below chart includes, in order, NY, Philadelphia, Richmond, Kansas City, and Texas. Month over month changes are in parentheses, showing momentum (the 2nd derivative), with the absolute diffusion values for October following. The final number is the average change and absolute number for all 5 together.
Regional Fed: NY. PHL. RVA. KC. TX. Avg
Headline: (-4.2) -19.4; (-9.9) -22.2; (6) -1; (4) -5; (-3.8) -9.4; (1.6) -11.4
Cap Ex (-8.1) -6.7; (9.5) 17.5; (4) 1; (7) 14; (-1.5) 5.8; (5.5) 6.3
Prices Paid (3.2) 66.4; (-3.0) 35.8; (0.6) 5.5; (-3) 35; (-1.4) 23.0; (0.7) 33.2
Prices Rec’d (-5.8) 26.4; (-8.9) 12.9; (0.1) 3.8; (5) 21; (-1.5) 5.8; (-1.6) 13.7
Wages (-2.3) 25.9; (9.6) 38.3; (0) 17; (11) 21; (-1.2) 10.7; (3.4) 22.6
Employment (-2.3) -5.2; (-5.5) -0.5; (0) 0; (8) -4; (-2.2) -5.8; (-0.4) -3.2
Most of the trends are the same:
1. like New Orders in the manufacturing series, Cap Ex is increasing at a reasonable clip.
2. Inflation in the form of both prices paid for materials, and prices passed on to consumers, is a serious issue, with only some of the increased costs being passed on.
3. While wages continue to increase at a significant clip, employment is dead in the water - actually declining slightly.
4. The one big difference is in the headline business conditions number, which continues to be in significant contraction.
While the forward looking New Orders and Capital Expenditures categories for both manufacturing and services sectors are expansionary, the economically weighted (i.e., 25% manufacturing and 75% services) headline numbers, at -7.8, are negative, as is the employment category, at -2.2.
With the huge caveat that these are diffusion indexes (i.e., number of companies expanding minus contracting for each datapoint), and are much more variable than the much larger official surveys that we are missing, what emerges is a sketch - exmphasizing *sketch* - of an economy that is on the cusp of a stagflationary recession.
