January Richmond Fed Plunges, Quadruple Dips In Biggest Miss To Expectations Since 2009

Tyler Durden's picture

So much for the latest "recovery." While everyone continued to forget that in the New Normal markets do not reflect the underlying economy in the least, and that the all time highs in the Russell 2000 should indicate that the US economy has never been better, things in reality took a deep dive for the worse, at least according to the Empire State Fed, the Philly Fed, and now the Richmond Fed, all of which missed expectations by a huge margin, and are now deep in contraction territory. Moments ago, the Richmond Fed reported that the Manufacturing Index imploded from a 9 in November, 5 in December and missed expectations of a 5 print at -12: this was the biggest miss to expectations since September 2009.

Read em and weep: 1, 2, 3 and 4 dips, a useful harbinger of what will happen to the housing market very soon too.

Activity Index

New Orders Index

Looking at the internals shows an atrocious picture: New Orders collapses from 10 to -17, Capacity Utilization tanked from 3 to -18, and number of employes dropped for the 2ndd month in a row, from 3 to -3 to -5. Ironically, not even the traditional fallback: "expectations" rose this time, declining from 20 to 18. But at least the hollow churn and channel stuffing continues unabated, as finished goods inventory doubled from 12 to 23.And to make sure the pain is complete, prices paid rose from 2.01 to 2.54 in January, making sure margins get squeezed "offsetting" plunging orders, and general business conditions. Or not.

From the report:

 

 

Manufacturing activity in the central Atlantic region declined in January following two months of modest expansion, according to the Richmond Fed's latest survey. Nearly all broad indicators of activity fell into negative territory. Other indicators also suggested additional softness. Capacity utilization turned negative as did the gauge for delivery times, while backlogs continued its downward trend. In addition, finished goods inventories grew at a slightly quicker pace.

 

In January, the seasonally adjusted composite index of manufacturing activity — our broadest measure of manufacturing — lost seventeen points to settle at ?12 from December's reading of 5. Among the index's components, shipments fell seventeen points to ?11, the gauge for new orders moved down twenty-seven points to end at ?17, and the jobs index slipped two points to ?5.

 

Other indicators also suggested weakening in January. The index for capacity utilization moved lower, subtracting twenty-one points to ?18, and the backlogs of orders lost eight points to end at ?19. The delivery times index turned negative, giving up seven points to end at ?4. The raw materials inventory index was virtually unchanged at 23, while the finished goods inventories gained nine points to also end at 23.

 

Hiring activity at Fifth District plants continued to edge lower in January. The manufacturing employment index slipped two points to settle at ?5 and the average workweek indicator lost two points to end at ?4. However, the wage index added one point to finish at 11.

 

District manufacturers reported that raw materials prices increased at an average annual rate of 2.54 percent, somewhat higher than December's reading of 2.01 percent. Finished goods prices rose at a 0.85 percent pace, slightly below December's reading of 1.57 percent.

 

Looking ahead six months, respondents on average expected that the prices they pay will advance at a 1.97 percent pace, somewhat below December's outlook of 2.54 percent. Contacts looked for finished goods prices to increase at a 1.11 percent annual rate, slightly above last month’s expectation for a 0.87 percent pace.