Collapse in Philly Fed Manufacturing Index to -30.7; Treasury Yields at Record Low; Stocks Sink, Gold Soars

The Philadelphia Fed Business Outlook Survey plunged to -30.7 with all indicators in decline.

The survey’s broadest measure of manufacturing conditions, the diffusion index of current activity, decreased from a slightly positive reading of 3.2 in July to -30.7 in August. The index is now at its lowest level since March 2009 (see Chart). The demand for manufactured goods, as measured by the current new orders index, paralleled the decline in the general activity index, falling 27 points. The current shipments index fell 18 points and recorded its first negative reading since September of last year. Suggesting weakening activity, indexes for inventories, unfilled orders, and delivery times were all in negative territory this month.

Firms’ responses suggest a deterioration in the labor market compared with July. The current employment index fell 14 points, recording its first negative reading in 12 months. About 18 percent of the firms reported an increase in employment, but 23 percent reported a decrease. The percentage of firms reporting a shorter workweek (28 percent) was greater than the percentage reporting a longer one (14 percent). The workweek index fell 9 points.

Current and Future Activity


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Activity



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As you can see, new orders, shipments, unfilled orders, and inventories are all in contraction. What's not? Prices paid. This represents a price squeeze on manufacturers.

Carnage in Equities



Futures are a bit off their lows but the S&P 500 is down 3.63%, Nasdaq 100 Index, 3.76%. The Dow is down 392 points, and the Nasdaq composite 101 points.

Yield Curve as of 2011-08-18



$IRX = 03-Mo Treasuries - Brown
$FVX = 05-Yr Treasuries - Blue
$TNX = 10-Yr Treasuries Orange
$TYX = 30-Yr Treasuries - Green

All but 30-year treasuries are at or near new all-time lows today.

Meanwhile, a quick check shows gold is +25.6 to $1817, having hit an all-time high of 1828 in the session.

If you thought the US is going to have a miracle second-half recovery you were clearly wrong. The US is likely in recession now.

Moreover, if you think gold is measuring "inflation" you are fooling yourself.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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