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 economistsÂ’ 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.
I feel a tingling in my leg.
