Thursday, April 19, 2007

Two Manufacturing Reports Show Slow Growth

I missed the NY Fed's manufacturing survey on Monday. Here's the main point of the report:

The Empire State Manufacturing Survey indicates that conditions for New York manufacturers were flat again in April. The general business conditions index edged up 2 points, to 3.8, rebounding only marginally from March.

New orders were just above 0. Shipments dropped.

Here's some bad news for the Fed. Prices paid increased while prices received dropped slightly. The prices received index has dropped for three-straight months. This may indicate producers are having to cut prices to move product. In addition, inventories have increased three straight months, indicating future production may drop to prevent more of an inventory build-up.

The Philadelphia Fed reported similar conditions:

Activity in the region’s manufacturing sector was basically unchanged again this month, according to firms polled for the Business Outlook Survey. The index for general activity was near zero, and indicators for new orders, shipments, and employment were only slightly positive, suggesting little change from March. Regarding future activity, the region’s manufacturing executives were somewhat more optimistic this month than they were in March.

The Philly area also reported similar pricing problems as the New York Area -- increasing inputs and stagnant prices received:

Area manufacturers reported higher costs for inputs again this month. The prices paid index edged three points higher and has now increased for three consecutive months. Thirty-seven percent of the firms reported higher input prices, up seven points from March; 13 percent reported lower input prices in April.

Despite increased costs, fewer firms reported higher prices for their own goods this month: 17 percent reported higher prices, down nine points from March. The prices received index fell 11 points, to 5.2, its lowest reading since August 2005.

These two reports indicate the decline in Capex spending may be hitting home with manufacturers.

In addition, manufacturers are just hanging on in positive/expansion territory.