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After Dallas Fed, Richmond Fed Re-Confirms Economic Contraction: Manufacturing Index Plunges

Tyler Durden's picture




 

Yesterday it was the Dallas Fed confirming our assumption that the US economy in Q2 has hit stalled speed. Today, it is the Richmond Fed which plunged compared to expectations and the March print of 20, instead dropping to 10, and indicative of a major slowdown in the manufacturing sector. From the index: "In April, the seasonally adjusted composite index of manufacturing activity – our broadest measure of manufacturing – fell ten points to 10 from March’s reading of 20. Among the index’s components, shipments decreased seventeen points to 6, new orders dropped ten points to finish at 10, and the jobs index eased two points to 14....All broad indicators – including shipments, new orders and employment – continued to grow but at a rate below March’s pace. Other indicators were mixed. Fifth District contacts reported that capacity utilization continued to grow more slowly, while backlogs turned slightly negative. Vendor delivery times edged higher and raw materials inventories grew at a somewhat higher rate." Now "Below March's pace" means trending Q2 GDP is now at or below 2%. But that's fine: somehow the economy will really hockeystick in Q3. And if not, there is QE3, 4 and 5. And the kicker, as usual, Prices Paid jumped as Prices Received plunged: which is always bullish for (collapsing) margins. Elsewhere the CON board called 7 Wall Street CEOs who told it that their butlers were happy with how much they paid for gas, but could pay a little more.

From the Richmond Fed:

Current Activity

In April, the seasonally adjusted composite index of manufacturing activity – our broadest measure of manufacturing – fell ten points to 10 from March’s reading of 20. Among the index’s components, shipments decreased seventeen points to 6, new orders dropped ten points to finish at 10, and the jobs index eased two points to 14.

Other indicators varied. The index for capacity utilization moved down twelve points to 2, and the backlogs of orders turned negative, losing nine points to -1. The delivery times index edged up two points to end at 18, while our gauges for inventories were mixed in April. The finished goods inventory index trimmed four points in April to end at 10, while the raw materials inventories index added nine points to 18.

Employment

Hiring conditions at Fifth District plants changed little in April from their March pace. The manufacturing employment index slipped two points to end at 14 and the average workweek measure eased three points to 7. In contrast, wage growth added three points to 22.

Expectations

Respondents in the current survey were generally optimistic about their business prospects over the next six months. The index of expected shipments decreased eleven points to end at 31, and the volume of new orders index dropped seven points to 38. Backlogs edged up two points to end at 27, while the capacity utilization and vendor lead time indexes both lost six points to finish at 28 and 12, respectively. Readings for planned capital expenditures registered a one-point gain to 29.

District manufacturers’ intentions to expand hiring held steady in April. The expected manufacturing employment index was unchanged at 17 and the average workweek indicator remained at 12. In addition, the expected wages index posted an eight-point loss to 30.

Prices

District manufacturers reported that raw materials prices increased at an average annual rate of 4.81 percent from March’s reading of 4.61 percent. Finished goods prices rose at a 2.60 percent pace from March’s reading of 3.01 percent last month.

Full breakdown:

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Tue, 04/26/2011 - 10:23 | 1207671 oogs66
oogs66's picture

Yes, but today, a recessionary level of consumer confidence is viewed as confirmation of how much better things are getting?  shoot me!

Tue, 04/26/2011 - 13:28 | 1208265 Popo
Popo's picture

Oh oh... the Fed is in a bind.  Oil prices are en route to their 2008 highs, and manufacturing is plunging.   What's it going to be boys?   The plank or the musket?

Tue, 04/26/2011 - 10:29 | 1207673 TruthInSunshine
TruthInSunshine's picture

That's okay.

McDonald's, at the urging of the Obama Administration (and a wink and nod from The Bernank & Jeetner), is ramping of efforts to recruit more hamburger assemblers.

two all-beef patties

special sauce

lettuce

cheese

pickles

sesame-seed bun

=steps in manufacturing process

Tue, 04/26/2011 - 10:30 | 1207692 centerline
centerline's picture

Thank god, our college grads might have some employment opportunities after all.

Tue, 04/26/2011 - 10:46 | 1207756 Long-John-Silver
Long-John-Silver's picture

If a college graduate is still making payments on college loans at death. That persons body will be confiscated at death along with any and all assets and sent to a medical college or research facility so that persons body and assets may be used to further the resources of said college or facility.

/sarc

Tue, 04/26/2011 - 10:44 | 1207772 TruthInSunshine
TruthInSunshine's picture

Translation = involuntary organ donor per auspices of new IMF Organ Donor Debt Reduction Treatise.

Tue, 04/26/2011 - 10:46 | 1207780 skam
skam's picture

You forgot my onions, sir.

Tue, 04/26/2011 - 14:27 | 1208531 TruthInSunshine
TruthInSunshine's picture

I know.

I forgot the onions.

I would be a bad assembly line/manufacturing sector worker.

Tue, 04/26/2011 - 10:41 | 1207737 Johnny Lawrence
Johnny Lawrence's picture

Hilarious.

Tue, 04/26/2011 - 11:10 | 1207858 SheepDog-One
SheepDog-One's picture

Holding the onions? Well, yeay for the McDonalds economic model, horrible deadly overpriced 'food' that my dogs wont even eat. And thats a true story, my dogs reject McDonalds.

Tue, 04/26/2011 - 14:32 | 1208548 TruthInSunshine
TruthInSunshine's picture

Same with my friend's German Shepherd. That dog is smart as hell. Completely walks away from McDonald's "beef patty."

Tue, 04/26/2011 - 10:27 | 1207675 Racer
Racer's picture

Zimbabwification of the US almost complete with surging stock market, soon to go up 50% daily

Tue, 04/26/2011 - 11:04 | 1207838 Urban Redneck
Urban Redneck's picture

When Wall Street opens the foreclosure floodgates the Mugabe/Obama Gono/Bernanke analogies will shift into high gear.

Tue, 04/26/2011 - 11:04 | 1207848 SheepDog-One
SheepDog-One's picture

On zero volume.

Tue, 04/26/2011 - 10:27 | 1207676 Jack Burton
Jack Burton's picture

Yes, but I heard on a NPR Market Place Morning Report yesterday that higher gas prices, even $5.00 a gallon, would not hurt the economy because the manufacturing sector is now the main driver of the economic recovery.

So what happened to the great manufacturing recovery? More green shoots BS?

Tue, 04/26/2011 - 10:30 | 1207700 centerline
centerline's picture

NPR has dropped the ball in most horrific way over the last year.  Maybe related to all the .GOV assistance they needed to stay on the air... hmmmmmm.

Tue, 04/26/2011 - 20:27 | 1209726 divide_by_zero
divide_by_zero's picture

Sometimes listen to NPR for a giggle or two although one tires of having crap read to you at a 4th grade level. NPR has been probably the most biased news source outside the NYT for the last 30-40 years now. Soros dumped $1.8 million into them last October thru his Open Society Foundation to help fund 100 new reporters for it's 50 members. Soon after that, I started hearing stooges from his Center for American Progress funded group start showing up in force.

Tue, 04/26/2011 - 10:29 | 1207684 centerline
centerline's picture

Wow.  I am shocked.  Never, ever saw this coming.  (not)

Tue, 04/26/2011 - 10:27 | 1207686 Cassandra Syndrome
Cassandra Syndrome's picture

Why bother Manufacturing, when you can wealth create with printing presses?. That Henry Ford was such a sucker to go to all that bother with the assembly line, mass production capers.....

Tue, 04/26/2011 - 10:28 | 1207691 overmedicatedun...
overmedicatedundersexed's picture

you can't dump trillion FRN's and not expect some impact..slow improvements in employment, stimulus to manufacturing, etc..but the impact of inflation is larger and removes the value created..so while slowly swimming up the toilet bowl the flush of debt is washing us down the hole...too bad the elites seem to never pay.

Tue, 04/26/2011 - 14:04 | 1208430 topcallingtroll
topcallingtroll's picture

So far the turd is still floating. Hang on and have some faith.

The flush of qe2 is about over and we are still in the bowl.

Tue, 04/26/2011 - 10:30 | 1207702 oogs66
oogs66's picture

CNBC right now highlighted consumer confidence - passed over richmond fed.  yeah, i know i shouldn't watch it, but couldn't help myself

Tue, 04/26/2011 - 10:46 | 1207781 Long-John-Silver
Long-John-Silver's picture

It's like watching a train wreck. You stand and watch instead of running even if you must dodge flying bodies.

Tue, 04/26/2011 - 10:34 | 1207721 KickIce
KickIce's picture

Yeah, I can see that hockey stick, if you're holding the blade and the butt end is on the ice...

  

Tue, 04/26/2011 - 10:41 | 1207748 nobusiness
nobusiness's picture

Why do we need economic growth?  Stock market growth, dollar distruction, and commodity boom are all that matter.

Tue, 04/26/2011 - 14:26 | 1207749 Miles Kendig
Miles Kendig's picture

This is a strong signal from the real economy that inflation continues to be moderate & contained due to the inability of manufacturers to pass along temporary upward pressures in raw materials and intermediate goods.  This also clearly quantifies the remaining slack in generalized manpower availability and associated wage pressures.  This bodes extremely well for our continued belief that these pressures will bring about a natural moderation in the recent upward pressure in some raw materials costs.  I would be inclined to consider that until employment returns to historical norms there should be little reason to alter our long term outlook regarding keeping interest rates low for an extended period while clearly illustrating the need to maintain the balance sheet of the federal reserve at the levels that it will attain at the end of our current program of quantitative easing.

- Ben Brenanke at tomorrows presser

Tue, 04/26/2011 - 10:47 | 1207783 alien-IQ
alien-IQ's picture

looks like the market is celebrating the inevitable arrival of QE v.XXX.

Tue, 04/26/2011 - 10:50 | 1207797 nobusiness
nobusiness's picture

If treasuries, oil, and stocks are all going up today, where is the "New" money coming from? Gold? Silver?  Yeah right.

Tue, 04/26/2011 - 10:57 | 1207809 topcallingtroll
topcallingtroll's picture

Fade the inflationary trade ( u shuda started a while back).

Later when the screaming is the loudest that deflation is just around the corner fade that too.

Tue, 04/26/2011 - 11:03 | 1207831 AldousHuxley
AldousHuxley's picture

This is what happens when all of the money goes to pay interest on the debt (mortgage, auto, education, government) instead of goods due to bubble asset prices sustained by banksters who profit via loans

Tue, 04/26/2011 - 11:02 | 1207836 SheepDog-One
SheepDog-One's picture

Weekend at Bernankes part 5!! We can keep it looking alive another couple hours just till those hookers with the coke stop by!

Tue, 04/26/2011 - 11:11 | 1207868 gaoptimize
gaoptimize's picture

How can the DOW not react to this today?  The stock market is no longer rational.  Does data that would indicate a future reduction in earnings simply not matter anymore?

Tue, 04/26/2011 - 11:16 | 1207883 topcallingtroll
topcallingtroll's picture

In the short term the dow is a voting machine.

In the long term it is a weighing machine.

Tue, 04/26/2011 - 11:33 | 1207940 plocequ1
plocequ1's picture

Thats because all these indexes , Charts and gages measure the old economy. This is the new economy. Earnings, Manufacturing, Unemployment all mean shit.

Tue, 04/26/2011 - 11:18 | 1207890 citrine
citrine's picture

"Respondents in the current survey were generally optimistic about their business prospects over the next six months."  Because major indicators point to slowdown??

 

Tue, 04/26/2011 - 11:44 | 1207959 takinthehighway
takinthehighway's picture

"Respondents in the current survey were generally optimistic about their business prospects going to s#^! over the next six months."

There...fixed.

Tue, 04/26/2011 - 11:24 | 1207907 slewie the pi-rat
slewie the pi-rat's picture

well, after japan, zHeads have been figuring "economic growth" might go negative.  even though it wasn't all that healthy anyhow, especially adjusted for reflation and the dollar dipz.

if 'economics' has any reality left to it at all, the fuking goobermint will hafta start sending people home, or shut down.  maybe QE3 can buy some more time, but for what, at this point?  more negative growth? 

batmanke may win a Nobel Prize, tomorrow, but slewie still thinks FED watching is a vice.  the circus elephant is the US Goobermnint, in the center ring with prez milk dud.

the FED is a sideshow.

and where are the clowns to shovel up the elephant shit?  lQQk at all that elephant shit!  jeeeez!  i think something's on fire, too!

Tue, 04/26/2011 - 12:24 | 1208140 gaoptimize
gaoptimize's picture

12:23 EDT : Rush Limbaugh calls out "Zimbabwe Ben Bernanke" and QE-2 driven inflation for contributing to higher gas prices.

Tue, 04/26/2011 - 13:27 | 1208261 Bansters-in-my-...
Bansters-in-my- feces's picture

and the DOW rally's

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