- The Philly Fed, a great forward-looking indicator, came out with a terrible number.
- The Empire Manufacturing Index was equally atrocious.
- Inflation isn’t going away any time soon, if these surveys are correct.
Hi, I'm Mark Rossano, Editor of the NEO Report.
Today we want to go through briefly the regional Fed data.
So far, we've had Philly Fed and the Empire.
I think it's really important to understand what they are saying, what they mean, and why we’re even talking about it, given all the data that's out there.
The reason why we talk about it is because it has a leading indicator behind it.
When you look at the Fed data and the US national data, it's an amalgamation and mathematically consolidated based on what the regions are saying.
The Philly Fed
When we look at the Philly Fed, I think it's important to understand the magnitude of what's happening.
November data came in contractionary at negative 19.4, which is well below the already bleak reading from October of negative 8.7.
The data going back to 1968 tells us what that in expansion periods, the Philly Fed normally averages 13.3.
In recessions, it normally averages -18.3.
We're currently sitting at -19.4.
This puts into context how low we are and how recessionary this data is.
The Empire Manufacturing Index
Now, let's look at the Empire side.
Empire Manufacturing came in better than expected at plus 4.5 versus the estimate of negative six.
Now let’s break it down.
Expected new orders fell into contraction, to the lowest they've ever been.
And then the outlook also fell to the lowest it's ever been.
So, we did get a small increase overall.
This is something where typically you're wrapping up work and ahead of the holidays.
But when you go past the holidays, they're essentially saying, “Look, this is a one timer.”
Nothing ever dies in a straight line, but it's more of this bouncing pattern and it's still directing to the downside prices paid and outlook for prices went up.
And one of them, prices paid, went back into expansion.
So again, we're starting to see prices creep back up, and that's going to be something to watch in general.
Then when you look at new orders, they came in at negative 3.3.
Again, a negative slide back into contraction prices paid bounced, but more importantly is the expected business conditions most negative ever.
This is more than it was during the great financial crisis and steeper than it was during covid expected new orders, also lowest it's ever been.
Then when we look at expected shipments, lowest it's ever been.
So then, then you take that, and you layer on top of it the Philly Fed, and you get an idea that there is a lot of concern out there, not only just right now, but also what's going to happen going forward.
So then when you look at the consumer and you can say, well, retail sales were strong.
It's like, but we must adjust that for inflation.
And when you adjust it for inflation, retail sales were still elevated. They're still fairly flat but diminishing.
And then you factor in negative deposits into banks, which means that people are now taking more out than putting in.
You see credit card data at a new record.
You see more and more pressure in the sense of inflation is going up still just at a slower rate, but it's still going up.
And that's something that's a bigger concern when you look at the data itself in terms of services, in terms of manufacturing, we have continuous pressure to the downside.
And one final note to leave you with is when we look at shipping data and we look at trucking data.
So trucking data is back to a new cycle low and below where it was in 2019 when we started to get really concerned about pricing.
And then when you take that and you look back through across the Pacific into China, you can see that there is a diminished number of new cargos coming into the U.S.
That points to slower trade, which points to a continuous drop in US trucking, which again leads to this question: Where is trade going?
Trade is diminishing. So, that's the global economic impact.
But then you look at the U.S., which means we're going have less stuff to move. That means again, our companies and consumers are buying less.
So that's what we have for you on that brief update.
If you have any questions, we'd love to hear from you. I hope you have a great rest of your day.
All the best,
Freedom Financial News
