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Philly Fed Business Outlook Comes Below Expectations, Inventories Still Dropping, Challenges Empire State Optimism

Tyler Durden's picture




 

Today's Philadelphia Fed October Business Outlook Survey came in at 11.5, below the consensus reading of 12, and a drop from September's read of 14.1. This number came in stark contrast to the Empire State Manufacturing Survey, which climbed to 34.6: the highest level since 2004! The worth of these "forward looking" surveys is increasingly being put into question. This view is best captured by the following piece from Briefing:

The lack of usefulness for the Fed's Business Outlook surveys can be seen with a quick comparison between the Philly report and the Empire State Manufacturing Survey from the New York Fed. The New York Fed is showing an extremely strong pickup in the manufacturing sector as the index improved a whopping 83% to 34.57 in October while the Philly report showed business conditions declined 18%.

It is impossible to discern which survey is telling the truth about the state of the manufacturing sector. The surveys can only give us an idea on how the manufacturing sector is doing in each Fed region.

Most notable from Philly Fed was the accelerating collapse in inventory levels which contracted a whopping 13.7 to -31.8 from -18.1 in September. As Q3 GDP growth has been primarily pegged on an inventory bounce, one wonders just where this inventory increase will come from as all the primary data continue to point in the opposite direction. Additionally, manufacturing margins continue to be squeezed: prices paid increased to 21.3 from 14.9, while prices received improved from -10.6 to -4.3, implying any manufacturing margin expansion is still far away.

 

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Thu, 10/15/2009 - 11:22 | 99779 bugs_
bugs_'s picture

Nobody expects the philly fed!

Thu, 10/15/2009 - 11:38 | 99801 deadhead
deadhead's picture

the only things being manufactured in New York are fraud and deception

 

Thu, 10/15/2009 - 13:10 | 99871 Fritz
Fritz's picture

+100

Thu, 10/15/2009 - 12:00 | 99817 Miles Kendig
Miles Kendig's picture

The Empire survey is a product of the New York Fed.  Anything else need to be said?

Thu, 10/15/2009 - 14:05 | 99936 Anonymous
Anonymous's picture

#!$# !#@@$ #$!##$$ @!#$ $!!#$$ !$$!@#$#

#!#

Thu, 10/15/2009 - 12:23 | 99837 ChickenTeriyakiBoy
ChickenTeriyakiBoy's picture

philly fed is pat's to new york's geno's

Thu, 10/15/2009 - 12:26 | 99839 SDRII
SDRII's picture

Must be all the forklifts over at JPM/GS fixed income floors

Thu, 10/15/2009 - 12:31 | 99844 TraderMark
TraderMark's picture

State revenues drop by most since at least 1963

http://www.bloomberg.com/apps/news?pid=20601110&sid=aeZod9l8IVx8

 

Next step? Another "stimulus" which is just a disguised bailout to the states ala 2009 coming again in 2010.

 

Thu, 10/15/2009 - 12:32 | 99846 TraderMark
TraderMark's picture

for gosh sake even Greenspan thinks the oligarchs are getting too big

 

http://www.bloomberg.com/apps/news?pid=20601110&sid=aJ8HPmNUfchg

Thu, 10/15/2009 - 12:40 | 99852 Commander Cody
Commander Cody's picture

I cannot believe that Greenspan spoke those words.  After all, he had been the chief stooge of the oligarchs.  Must be TD in disguise.

Thu, 10/15/2009 - 14:08 | 99939 Anonymous
Anonymous's picture

Mostly shifting attention to Paulson. A hint that he is going down with Kenny?

Thu, 10/15/2009 - 14:26 | 99974 Assetman
Assetman's picture

Senility must be really setting in...

Thu, 10/15/2009 - 13:10 | 99870 Anonymous
Anonymous's picture

No worry. With oil passing the $75 resistance level for the first time in (I think almost a year),pretty soon we are back to the same 2008 level(didn't Greenspan say he is not worried about the dollar,it is only going to precrises level?I guess so is oil). And pretty soon any hopes for a green shoots will be killed globally. I guess the IMF will have to sell more gold(if it has any to begin with)to give to all third world countries. However,Zimbabwee wouldn't have a problem.......................

Fri, 10/16/2009 - 00:41 | 100584 Anonymous
Anonymous's picture

this is an interesting situation.....supposedly
oil is sitting in tankers creating a massive
oversupply of oil and prices were supposed to
collapse....

it looks like they will not....another sign
of inflation buildup...

Thu, 10/15/2009 - 13:18 | 99883 Daedal
Daedal's picture

I just had lunch at an investor conference, and spoke to a CIO from a manufacturing firm (<$1 bil in market cap). This is what he told me: '2009 has been a great year, but 2010 will be horrible because our backlog fell off a cliff' Now, that's just at small firm, and I have no way to confirm those statements, but that was the sanest thing I've heard all day.

Thu, 10/15/2009 - 13:37 | 99906 Gilgamesh
Gilgamesh's picture

Same thing is happening at the >1B manufacturers around here.  They are public, so it gets aired every 3 months.  But people working there say it's worse.

Thu, 10/15/2009 - 13:24 | 99887 Anonymous
Anonymous's picture

Could someone please explain the reasoning for the inventory collpase and what it means? I believe I'm thinking about it in the inverse way. Thanks...

Thu, 10/15/2009 - 13:27 | 99891 trillion_dollar...
trillion_dollar_deficit's picture

Could someone please explain the reasoning behind the inventory collapse and what it means to the broader economy in this context? I think I'm thinking about it incorrectly (as in an inventory drop is good because it means businesses are selling shit). Thanks...

Thu, 10/15/2009 - 15:01 | 100010 Daedal
Daedal's picture

Could someone please explain the reasoning behind the inventory collapse and what it means to the broader economy in this context? I think I'm thinking about it incorrectly (as in an inventory drop is good because it means businesses are selling shit). Thanks...

To best explain this, take a look at a furniture store. In 2007, a local store (friend's family) had inventory turnover of about 30 days. So they would stock UP on inventory. Last I checked, their inventory turnover was down to 90 days, so they don't need to have as much inventory in their stores. So, in that respect, low inventory levels mean that business is bad.

But theoretically, your point is valid, but you have to place it in the context of how businesses function. When businesses deal with just-in-time inventory, they may never really have material inventory levels regardless of growing or contracting economic conditions. But even then, you could look at their suppliers and see their inventory levels. If the suppliers have low inventory, then chances are there's not that much demand.

Think of it like this -- you'd want to have a lot of inventory only when you know you can sell it b/c you never want to have demand for a product and not have enough of the product to sell (lost revenue). On the flip side, if you have too much inventory and not enough demand, at best, there's maintence costs, storage costs, and a lack of liquid assets and, at worst, there's depreciation or downright depletion, like food that has a shelf life (costs to holding inventory).

So it becomes a balancing act. Look at GM and cash for clunkers, which temporary increased demand. GM viewed that as sustained demand and <foolishly> increased production/inventory of their cars.

Hope that explains it.

Thu, 10/15/2009 - 13:27 | 99892 BobPaulson
BobPaulson's picture


To understand media today one must read the information for what you learn about the writer from what they appear to want the masses to believe. This his been the case for a very long time, but good to remember at times like this.

Thu, 10/15/2009 - 13:31 | 99896 Anonymous
Anonymous's picture

They don't call us Negadelphia for nothin'.

Thu, 10/15/2009 - 14:19 | 99955 mdtrader
mdtrader's picture

RBOB on it's way to $2. Gas on it's way to $3. How long before Wall Street realises this will kill the recovery, assuming there is a recovery in the first place? Dear consumers please send any discretionary spending money directly to the middle east, courtesy of the friendly dollar depreciation program.

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