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Friday, January 25, 2013

Kansas City FED manufacturing survey

The latest Kansas City FED survey came out negative like the other three regions did this month.  Here is the chart.


This survey stayed positive longer last year then most.  However, it has been negative four months in a row now.  Far different then how we started the year last year.

Here is a snippet from the report.  Underline emphasis is mine.

The month-over-month composite index was -2 in January, largely unchanged from readings of -1 in December and -3 in November (Tables 1 & 2, Chart). The composite index is an average of the production, new orders, employment, supplier delivery time, and raw materials inventory indexes. Manufacturing activity declined at most durable goods-producing plants, while nondurable producers noted a slight increase overall. Most other month-over-month indexes were below zero but higher than in December. The production index inched higher from -5 to -3, and the shipments, new orders, and order backlog indexes also rose somewhat but stayed in negative territory. In contrast, the employment index fell from -1 to -8, its lowest level since mid-2009, and the new orders for exports index also declined. The raw materials inventory index decreased from 1 to -4, and the finished goods inventory index dropped from 0 to -10.
Most year-over-year factory indexes fell for the second straight month, with several indexes continuing to post two-year lows. The composite year-over-year index decreased from 7 to 1, and the production, shipments, and new orders indexes also declined. The order backlog index decreased from -7 to -12, and the capital spending index dropped to its lowest level since late 2010. On the other hand, the employment index edged slightly higher. Both inventory indexes fell after rising last month.

Durable goods and employment both declined.  Also important was that the new orders index was -2 and new export orders was -8.  Continued weakness coming?

I keep covering the manufacturing data because I believe it is the key to understanding where the economy is going.  I don't care what GDP, retails sales or the employment data says.  Those are all highly revised data series.  However, if people are buying stuff then manufacturers will get orders to make more stuff and that feeds through the economy in a positive way.  When people slow down on buying stuff the reverse happens.  In our industrial society economic growth begins and ends with manufacturing.  It is really that simple.  Why has China become an economic power?  They started making stuff for everybody else. When the economy is not in a recession slow downs in the manufacturing data are short lived.  Only in a recession is there pervasive weakness like we have had the last six months.  Any economist that says there is no chance we are in a recession is clearly biased or an idiot (potentially both).  My apologies to any economists out there. I think it will be hard for the economy to rebound with an extra 2% taken out of paychecks.  I guess we will see.


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