Second manufacturing report shows decline amid mixed signals

posted at 12:05 pm on June 16, 2011 by Ed Morrissey

Yesterday it was the Empire State manufacturing index that turned unexpectedly negative.  Today, it’s the Philadelphia Fed’s manufacturing index that dropped into the red … “unexpectedly.”  The report comes amid decidedly mixed economic signals today:

Factory activity in the U.S. Mid-Atlantic region unexpectedly shrank in June in another sign of weakness in the manufacturing sector, a survey showed on Thursday.

The Philadelphia Federal Reserve Bank said its business activity index fell to minus 7.7 in June from positive 3.9 the month before. It fell far short of economists’ expectations for a rise to 6.8, according to a Reuters poll. It was the lowest level since July 2009.

The new orders index also fell, coming in at minus 7.6 from 5.4 in May, while inventories dropped to minus 8.5 from minus 5.4. New orders were at their lowest since June 2009.

As Reuters reports, anything below a zero in both reports indicates contraction in the manufacturing sector.  The drop in orders portends further contraction during the summer, which will certainly not help job creation.  If the trend continues, manufacturing could start shedding jobs — especially since inventories are hitting record levels already.  Slack demand and overstocking leads fairly logically to curtailed manufacturing, and this is merely the consequence of a long series of reversals in the economy.

Other news was a little more optimistic, but only in comparison to starkly bad previous results.  Reuters gives it the best possible spin:

The number of Americans signing up for jobless benefits fell last week, while housing starts and building permits rose in May, offering some hope the economy could be starting to pull out of its soft patch.

Initial claims for state unemployment insurance slipped 16,000 to 414,000, the Labor Department said on Thursday, suggesting the jobs market was regaining some momentum after stumbling badly in May.

A separate report from the Commerce Department showed groundbreaking for homes rose 3.5 percent to an annual rate of 560,000 units, retracing almost half of April’s steep decline. New building permits unexpectedly rebounded 8.7 percent to the highest level since December.

The reports offered at least a hint the economic slowdown that started as the year began could be easing.

Actually, the dip in the initial jobless claims falls within the ~420K range we’ve been seeing for the past 10 weeks.  The difference is so slight that it doesn’t indicate anything by itself.  The negative manufacturing numbers are a better predictor of future hiring and termination than this, which is more or less statistical noise.

The news from the housing market is better than the weekly claims number, but as Reuters reports, it’s basically a small rebound from the bottom.  That’s better than going further down, of course, and both housing numbers show some optimism in the construction market.  Completions in May were only up 0.4%, however, and still 22.5% below the May 2010 rate.  The annualized rate of single-family housing starts (419K) in May is still the third-lowest in a year, ahead of only April and March of this year.  Residential housing under construction actually declined in May by 0.2%, and among single-family homes by 0.8%.

If we’re looking into crystal balls, the manufacturing numbers should be looming largest — and looking decidedly pessimistic for short-term economic growth.  We may count ourselves lucky in Q2 if we haven’t fallen into negative GDP growth numbers, as we certainly will if these trends continue.


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DWS: “We own this economy.”

Ward Cleaver on June 16, 2011 at 12:07 PM

Can we get sprinkles with our Double Dip?

/probably golden sprinkles

Ward Cleaver on June 16, 2011 at 12:08 PM

Headed in the right direction!!!

-Barry

VelvetElvis on June 16, 2011 at 12:10 PM

Comments from dippity do?

cmsinaz on June 16, 2011 at 12:10 PM

Owning!

golfmann on June 16, 2011 at 12:11 PM

Considering the number of homes destroyed in the last month from the tornadoes, it is not surprising that new homes rose somewhat. Figuring out how many are tied to that would be the trick.

michaelo on June 16, 2011 at 12:13 PM

Hey, Barry, this is what happens when energy prices “necessarily skyrocket”.

You own this economy, like it or not.

teke184 on June 16, 2011 at 12:16 PM

Yessiree, Debbie Wasserman-Shultz! You want to own the economy? It’s yours! You can HAVE it!

pilamaye on June 16, 2011 at 12:17 PM

“I guess I don’t know what the hell I’m doing. HAHAHAHAHAHAHAHAHAHAHAHA! I crack myself up!”

-PBHO

Bishop on June 16, 2011 at 12:17 PM

You own this economy, like it or not.

teke184 on June 16, 2011 at 12:16 PM

Yessiree, Debbie Wasserman-Shultz! You want to own the economy? It’s yours! You can HAVE it!

pilamaye on June 16, 2011 at 12:17 PM

Actually, the economy owns them.

ChrisB on June 16, 2011 at 12:17 PM

both reports indicates contraction in the manufacturing sector.

But ATM manufacturing is booming.

ChrisB on June 16, 2011 at 12:19 PM

No Stanley Cup Final game 7 open thread?

It’s ok, we understand that most are just jealous of our BOSTON BRUINS, the 2011 Stanley Cup Champions!

shanimal on June 16, 2011 at 12:21 PM

Doesn’t Obama realize that Debbie IS A MESS. He tells us not to mess with her …….. who would even want to get NEAR HER.

And oh yes folks – better start buying candles – when those electric bills start skyrocketing – everyone will be having candle light dinners.

IlonaE on June 16, 2011 at 12:21 PM

Thank you President Obama.
 
crr6 on May 1, 2011 at 10:45 PM

rogerb on June 16, 2011 at 12:23 PM

“Companies just need to hire more workers”

BHO

The ultimate in cargo cult thinking.

esnap on June 16, 2011 at 12:25 PM

Barack Hussein Doubledip, MMMM, mmmm, mmm.

ChrisB on June 16, 2011 at 12:28 PM

I recently found this little thing… Interesting and devastating… devastating at least for the families…

I know several families in my area that bought a house and in 2 months their houses were back in the market for sale. Most of them were due to job loss… a couple were because of need for job change…

antisocial on June 16, 2011 at 12:28 PM

The AP is hopelessly delusional and in Obama’s ars, crawling and feeding on what they dwell in.

WASHINGTON (AP) — Fewer Americans applied for unemployment benefits last week, though applications remain above levels consistent with a healthy economy.

Unemployment benefit applications fell 16,000 to a seasonally adjusted 414,000, the second drop in three weeks, the Labor Department said Thursday. That’s a positive sign that layoffs are slowing.

Still, applications have been above 400,000 for 10 straight weeks, evidence that the job market is weak compared to earlier this year.

Applications had fallen in February to 375,000, a level that signals sustainable job growth. They stayed below 400,000 for seven of nine weeks. But applications surged in April to 478,000 — an eight-month high — and they have declined slowly since then.

Schadenfreude on June 16, 2011 at 12:34 PM

The $64,000 question remains, can we recover after Barry, or will his damage be permanent?

Tim Zank on June 16, 2011 at 12:36 PM

Considering the number of homes destroyed in the last month from the tornadoes, it is not surprising that new homes rose somewhat. Figuring out how many are tied to that would be the trick.

michaelo on June 16, 2011 at 12:13 PM

Good point.

So we should be thanking the global warming weather disasters for boosting the economy.

davidk on June 16, 2011 at 12:37 PM

Why is Larry Kudlow always so optimistic?

Dhuka on June 16, 2011 at 12:37 PM

It’s the fault of those damned ATM’s and airport kiosks!

They’re destroying America!!!!!

Can you smell the sarcasm?

pilamaye on June 16, 2011 at 12:39 PM

our BOSTON BRUINS, the 2011 Stanley Cup Champions!

Here’s some music to help Boston Bruins fans celebrate.

Emperor Norton on June 16, 2011 at 12:45 PM

We need to be manufacturing more solar shingles…

PatriotRider on June 16, 2011 at 12:46 PM

And oh yes folks – better start buying candles – when those electric bills start skyrocketing – everyone will be having candle light dinners.

IlonaE on June 16, 2011 at 12:21 PM

No, candles will be outlawed because of the polar bears.

smill1953 on June 16, 2011 at 12:46 PM

..well, as Debbie Blabbermouth-Schitz said yesterday, “[they] own the economy..”

The War Planner on June 16, 2011 at 12:48 PM

Have you seen the unemployment news or AP’s spin?

Another 414,000 UNEMPLOYED!

The AP avoids using the U word.

AP Headline “Unemployment applications drop, but remain high”

What does that mean?

anyway the article is a disgusting display of Failbama Rump kissing.

dogsoldier on June 16, 2011 at 12:59 PM

Oh here’s teh link:
http://finance.yahoo.com/news/Unemployment-applications-apf-2461058523.html?x=0&.v=2

BTW Orders for manufactured items will continue to slide. What are you going to choose, gas and food or thing you dont need? Save up for home heating oil, because by November things will be ugly.

dogsoldier on June 16, 2011 at 1:02 PM

Yes, the economy is showing “green sprouts” and the “profit to earning ratios” are compelling. Bring on the clowns.

petefrt on June 16, 2011 at 1:03 PM

So what has Barry got to say about these wonderful numbers?

GarandFan on June 16, 2011 at 1:05 PM

And oh yes folks – better start buying candles – when those electric bills start skyrocketing – everyone will be having candle light dinners.

IlonaE on June 16, 2011 at 12:21 PM

Yep, and burning animal dung for heat. Share the sacrifice.

petefrt on June 16, 2011 at 1:05 PM

Barack Hussein Hoover Obama

petefrt on June 16, 2011 at 1:07 PM

Debbie Double-Dip

4Freedom on June 16, 2011 at 1:10 PM

If the EPA doesn’t outlaw firewood burning we will have something to cook with this coming winter.If you have any fire wood and something to cook.

docflash on June 16, 2011 at 1:25 PM

The $64,000 $14,000,000,000,000 question remains, can we recover after Barry, or will his damage be permanent?

Tim Zank on June 16, 2011 at 12:36 PM

FIFY

BobMbx on June 16, 2011 at 1:25 PM

Why is Larry Kudlow always so optimistic?

Dhuka on June 16, 2011 at 12:37 PM

Because he is a shill for Wall St. For Wall St, times are always great and it is always a great time to buy stocks.

angryed on June 16, 2011 at 1:27 PM

The $64,000 question remains, can we recover after Barry, or will his damage be permanent?

Tim Zank on June 16, 2011 at 12:36 PM

One term, yes we can recover.

Lanceman on June 16, 2011 at 1:34 PM

Count Own it!

iurockhead on June 16, 2011 at 1:46 PM

And oh yes folks – better start buying candles – when those electric bills start skyrocketing – everyone will be having candle light dinners.

IlonaE

See, this is just the democrats helping with the romantic nature of family time together.

todler on June 16, 2011 at 2:49 PM

“Obama presidency fails…unexpectedly!!!”

Django on June 16, 2011 at 4:16 PM