Empire State Manufacturing: New Orders Negative 4th Time in 5 Months; Slight Bounce in Industrial Production
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A couple of new economic reports were out today. Both highlight ongoing weakness in manufacturing.
Empire State New Orders Negative 4th Time in Five Months
Bloomberg Econoday economists called the Empire State Manufacturing number correctly, but it was a weak one. The consensus estimate was 3.5 vs. the actual report of 3.86.
The manufacturing sector isn't picking up any steam this month based on the Empire State index which came in only just above zero, at 3.86. The new orders index, ominously, is in negative ground at minus 3.50. This is the fourth negative reading in five months for new orders which points squarely at slowing overall activity in the months ahead.Slight Bounce in Industrial Production
And hiring this month has slowed, to 3.19 vs June's 8.65 in yet another soft signal. Price data show moderation for inputs at 7.45 vs 9.62. One plus in the report is a slight uptick in the 6-month outlook to 27.04 vs 25.84.
Following unexpected negative numbers in April and May, an Industrial Production bounce in June came pretty much in line with Economist's Expectations.
A plus 0.3 percent rise in June industrial production looks respectable but still overstates strength. The gain follows two prior months of sizable contraction, at minus 0.2 percent and minus 0.5 percent, and reflects a jump higher for utilities and for mining. Manufacturing, and the key component for the series, is unchanged for a second straight month -- truly dead in the water at a year-on-year rate of only plus 1.8 percent.
Motor vehicle production is very weak in the June report, down 3.7 percent and more than offsetting a 0.8 percent rise for hi-tech production, a 0.7 percent gain for chemicals, and a 1.4 percent jump for furniture. Retail sales of vehicles surged back in May but turned lower in June which doesn't point to much of a rebound for vehicle production later this summer.
One sign of strength is a 2 tenths uptick in the overall capacity utilization rate to 78.4 percent. But here too, the gain reflects gains for utilities and mining and not manufacturing where capacity utilization actually fell 1 tenth to 77.2 percent.
This report offers the first conclusive data on the manufacturing sector during June while this morning's earlier release of the Empire State report offers the first anecdotal look at July. And the verdict? A manufacturing sector that is being hurt by weakness in exports and that's dragging down the economy's growth.
Coupled with dismal retail sales numbers, the economy does not look that robust to me.
Mike "Mish" Shedlock