Philly Fed Beats Even As New Order Drop To May 2013 Levels, Inventories Tumble

Tyler Durden's picture

On the surface, the January Philly Fed was a beat, printing at 9.4 on expectations of a 8.7 number and up from a downward revised 6.4. However, the internals were hardly as pretty with the most notable, New Orders, plunging from 12.9 to 5.1, the lowest print since May 2013, and also the biggest three month drop since August 2011. Additionally, while unfilled orders posted a modest increase from -6.6 to -1.0, Inventories were crushed sliding from 16.0 to -19.6, on what one can assume were wholesale liquidations, and judging by the retailers abysmal numbers, at hardly profitable levels. Furthermore, the optimism of the diffusion index respondents seems to be waning as the 6 Months forecast slide from 44.8 to 34.4 after hitting a recent near all time high of just shy of 60. Also bad news for margins, as Prices Paid increased by 2.3 points to 18.7, while Prices Received decline from 10.8 to 5.1 - a delta, in the wrong direction, of 13.6. The only good news in the report was the increase in number of employees from 4.4 to 10.0, however offset by the average employee workweek which dropped from 4.8 to -5.3. So more workers, doing less: so much for wage inflation pressures.

The data charted:


Just the New Orders data:


And the full component breakdown:

From the report's analysis of current conditions:

The survey’s broadest measure of manufacturing conditions, the diffusion index of current activity, increased from a revised reading of 6.4 in December to 9.4 this month (see Chart). The index has now been positive for eight consecutive months. The current shipments and new orders indexes remained positive but moved in opposite directions compared with December. The demand for manufactured goods, as measured by the current new orders index, decreased from a revised reading of 12.9 to 5.1 this month. Shipments continued to expand, and its index edged slightly higher to a reading of 12.1. Labor market indicators showed some improvement this month. The current employment index increased 6 points from its revised reading in December. Twenty?three percent of the firms reported increases in employment in January, which is slightly higher than the 18 percent that reported increased employment last month. Firms reported reduced work hours, with the average workweek index falling from 4.8 to ?5.3. Cost pressures were slightly more widespread this month among reporting firms: The prices paid index increased 2 points, to 18.7. But with respect to firms’ own manufactured goods, price increases were less widespread this month: The prices received index decreased 6 points, to 5.1.

As for the 6 month outlook:

The survey’s future indicators have recently shown moderating optimism about growth in manufacturing. This month, the future general activity index fell 10 points, from a revised reading of 44.8 in December to 34.4 this month (see Chart). Still, nearly 48 percent of the firms expect increases in activity over the next six months; 13 percent of the firms indicated that they expect decreases. The indexes for future new orders and shipments also remained at relatively high levels but fell 7 points and 9 points, respectively. The future employment index was virtually unchanged at 17.5, with nearly 25 percent of the firms expecting to increase employment over the next six months.

And with GM's year end, near-record channel stuffing now long gone, it is all downhill from here.

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papaswamp's picture

"...more workers doing less."THis is the ACA effect. THis is companies beginning to roatate to part time employees (need more of) in order to be under the 29hr work week for workers. Expect to see this trend continue as the time ticks down for businesses to have to come into ACA compliance this year.

Headbanger's picture

Yo!  Must be all the soft pretzels and cheese steak & Italian hoagies yous guys selling where you at!

Know where the word "hoagie" comes from??

NotApplicable's picture

Worse still? Likely every last bit of those orders can be filed under malinvestment, as there is NO sustainable demand left.

There is only leveraged debt emanating from the sovereigns/CBs.

At some point we're gonna run out of tangible capital to waste. Then the fun really starts.

So, are the warehouses filled with non-productive junk yet?

ILLILLILLI's picture

"The chocolate ration will be increased to 20 grams per week" - Ministry of Plenty

ILLILLILLI's picture

"What happened in the unseen labyrinth to which the pneumatic tubes led, he did not know in detail, but he did know in general terms. As soon as all the corrections which happened to be necessary in any particular number of ‘The Times’ had been assembled and collated, that number would be reprinted, the original copy destroyed, and the corrected copy placed on the files in its stead. This process of continuous alteration was applied not only to newspapers, but to books, periodicals, pamphlets, posters, leaflets, films, sound-tracks, cartoons, photographs — to every kind of literature or documentation which might conceivably hold any political or ideological significance. Day by day and almost minute by minute the past was brought up to date. In this way every prediction made by the Party could be shown by documentary evidence to have been correct, nor was any item of news, or any expression of opinion, which conflicted with the needs of the moment, ever allowed to remain on record. All history was a palimpsest, scraped clean and reinscribed exactly as often as was necessary. In no case would it have been possible, once the deed was done, to prove that any falsification had taken place. The largest section of the Records Department, far larger than the one on which Winston worked, consisted simply of persons whose duty it was to track down and collect all copies of books, newspapers, and other documents which had been superseded and were due for destruction. A number of ‘The Times’ which might, because of changes in political alignment, or mistaken prophecies uttered by Big Brother, have been rewritten a dozen times still stood on the files bearing its original date, and no other copy existed to contradict it. Books, also, were recalled and rewritten again and again, and were invariably reissued without any admission that any alteration had been made. Even the written instructions which Winston received, and which he invariably got rid of as soon as he had dealt with them, never stated or implied that an act of forgery was to be committed: always the reference was to slips, errors, misprints, or misquotations which it was necessary to put right in the interests of accuracy.

But actually, he thought as he re-adjusted the Ministry of Plenty’s figures, it was not even forgery. It was merely the substitution of one piece of nonsense for another. Most of the material that you were dealing with had no connexion with anything in the real world, not even the kind of connexion that is contained in a direct lie. Statistics were just as much a fantasy in their original version as in their rectified version. A great deal of the time you were expected to make them up out of your head. For example, the Ministry of Plenty’s forecast had estimated the output of boots for the quarter at 145 million pairs. The actual output was given as sixty-two millions. Winston, however, in rewriting the forecast, marked the figure down to fifty-seven millions, so as to allow for the usual claim that the quota had been overfulfilled. In any case, sixty-two millions was no nearer the truth than fifty-seven millions, or than 145 millions. Very likely no boots had been produced at all. Likelier still, nobody knew how many had been produced, much less cared. All one knew was that every quarter astronomical numbers of boots were produced on paper, while perhaps half the population of Oceania went barefoot. And so it was with every class of recorded fact, great or small. Everything faded away into a shadow-world in which, finally, even the date of the year had become uncertain."

Headbanger's picture

Dude, are you quoting "1984" or "Brazil" ??

Cognitive Dissonance's picture

Imagine what that report would look like if the Fed removed the coke spoon from under a few noses.

<I guess that explains Ben sleeping on the print button.>

fuu's picture

"So more workers, doing less: so much for wage inflation pressures"

That explosion would be entertaining.

Congrats Tyler, the number of ads, scripts, and crap running have now rendered the site pretty much inoperable without ad tools.

Off to learn the 1 weird loophole to save me money on my car insurance! Wait that gives me an idea. We need a federally run exchange for auto insurance.

JPM Hater001's picture

Hmmm, then why the drop in the Baltic?

Headbanger's picture

Seriously??    The Baltic Dry Index is a measure of global shipments not of soft pretzel and cheese steak hoagie sales.