Philly Fed Plunges, First Contraction Since September 2011

Tyler Durden's picture


Remember the surge in the Empire Fed which was the straw so desperately clutched by all those who still held on to hope the US economy was still kinda sorta growing? Oops. The May Philly Fed just came out and was a disaster, printing at -5.8, down from 8.5 and crashing expectations for an increase to 10.0. This was the first contractionary print since September 2011 and the biggest miss since August 2011, but the worst news is that the Number of Employmees indicator was in absolute freefall, plummeting from 17.9 to -1.3. And now come the downward NFP revisions, and NEW QE (because courtesy of AAPL it is no longer QE [X] anymore) whispers.

From the report:

Firms responding to the May Business Outlook Survey indicated that manufacturing growth fell back from the pace of recent months. The survey’s broad indicators for general activity fell into negative territory for the first time in eight months. Indicators for new orders and employment also suggested slight declines from April. Input price pressures were less in evidence this month, and for the first time in  nine months, more firms reported price declines for their products than reported increases. The survey’s indicators of future activity  remained positive but weakened considerably from April


Indicators Suggest Slowing


The survey’s broadest measure of manufacturing conditions, the diffusion index of current activity, fell from a reading of 8.5 in April to ?5.8 in May (see Chart 1). The index for new orders fell four points, from 2.7 to ?1.2, its first negative reading in eight months. The shipments index edged 1 point higher and remained just above zero. The indexes for current unfilled orders and delivery times both declined and registered negative readings, suggesting lower levels of unfilled orders and faster deliveries. Firms’ responses suggest a slight decline in employment this month. The current employment index, which had been positive for eight consecutive months,decreased  19 points, to ?1.3. The percentage of firms reporting decreases in employment (16 percent) was slightly higher than the percentage  reporting increases(14 percent). Firms also reported a slight decrease in average hours worked compared with April.

And the worst news is for the ISM, courtesy of John Lohman:

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Thu, 05/17/2012 - 10:15 | 2435197 Cognitive Dissonance
Cognitive Dissonance's picture

And there goes Gold with a very pretty spike up.

"Is that a 60 minute Gold chart in your pocket or are you just happy to see me" - Mae West

Thu, 05/17/2012 - 10:17 | 2435227 Zero Debt
Zero Debt's picture

And DXY and 10yr isn't falling either...something's up

Thu, 05/17/2012 - 10:19 | 2435241 GetZeeGold
GetZeeGold's picture



printing at -5.8, down from 8.5 and crashing expectations for an increase to 10.0


Not sure I like the sound of that.


Thu, 05/17/2012 - 10:29 | 2435275 hedgeless_horseman
hedgeless_horseman's picture



Ladies and gentlemen, now performing in one of his last shows in the public arena, The Big Bid, The Rubber Floor, The Head Intern, the inimitable Mr. Brian Sack!

Edit:  Seems his act isn't being simulcasted in France.

Thu, 05/17/2012 - 10:46 | 2435432 JPM Hater001
JPM Hater001's picture

"chiseled complete devistation due to a curious drop from a fictional high with hints of mood towards rainbows being crushed."

There.  Fixed.

Thu, 05/17/2012 - 10:19 | 2435243 battle axe
battle axe's picture

Your elevator is right over here, and it is the express elevator DOWN....

Thu, 05/17/2012 - 10:19 | 2435245 EscapeKey
EscapeKey's picture

DJIA just took a 180 turn. PPT to the rescue, or more QE3 expectations...

Thu, 05/17/2012 - 10:19 | 2435247 resaci
resaci's picture


Thu, 05/17/2012 - 10:22 | 2435261 slaughterer
slaughterer's picture

Fed will extend OT.  Too much political risk for a NQE.  

Thu, 05/17/2012 - 10:22 | 2435264 walküre
walküre's picture

Gold miners are being bought like there's no tomorrow.

QE3 is on or bust.

Thu, 05/17/2012 - 10:16 | 2435219 ihedgemyhedges
ihedgemyhedges's picture

How about the plunge in unfilled orders, average workweek.  And prices paid rising faster than prices received.  Well telegraphed margin squeeze...........

Thu, 05/17/2012 - 10:22 | 2435267 rosiescenario
rosiescenario's picture

Good this economy, companies have a problem with raising prices....I'd guess that most all of the analysts tracking WS haven't built that into their we willbegin to see earnings miss, the "e"of p/e lowered and a general market crash.....later this summer.

Thu, 05/17/2012 - 11:19 | 2435642 FlyoverCountryS...
FlyoverCountrySchmuck's picture

"a general market crash.....later this summer."


The FED won't allow that, and will spend whatever is required, will print whatever is required, to prop up the economy until Nov 7. After that, they won't give a damn, and Obama can fulfill the dream of George Wiley, Andy Stern, Noam Chomsky, etc, and CRASH THE ECONOMY, rebuilding it in keeping with the Radical Socialist dream of the Socialist Utopia of Next Tuesday.

What did you think "Fundamentally Transform America!" meant?

Thu, 05/17/2012 - 10:36 | 2435341 Zero Debt
Zero Debt's picture

Not exactly, prices received are decreasing while prices paid are increasing. It is a double whammy, not just a 1-side change. Margins thus are getting squeezed from both sides: deflation in revenues, inflation in costs.

And besides, the employed are working shorter workweeks, which also decreases the likelihood of more hiring.

And delivery times are lower (means less capacity utilization), and inventories are increasing while shipments increase. How come? One possibility: This "positive" may actually be a strategic mistake: Increasing shipments doesn't mean they are genuine orders, it can just be inventory buildup - make to stock versus make to order, to hedge against a demand surge. With low interest rates, they may financially find it easier to finance their inventories at lower capital costs (the classic deception of low rates causing businesses to overinvest). This may be because the respondends appear to expect significantly better conditions in 6 months: look at the right hand side, you see new orders shooting up: 41.4 vs 15.1. The big question is: what if these orders do not actually materialize? Are they still going to get the "prices paid" right, which is also going to massively increase? Or will they only be stuck with just the price increase.

What you can say in general is, the realized actual values are broadly worse while the future expectations are levitating. Make a bet...

Thu, 05/17/2012 - 10:16 | 2435225 GolfHatesMe
GolfHatesMe's picture

have no fear, Brian Sack is here.  Well, not for another 15 minutes.

Thu, 05/17/2012 - 10:19 | 2435239 Auburn
Auburn's picture

Nice bullish effect on the markets .... uggh!  I don't get it.

Thu, 05/17/2012 - 10:33 | 2435344 SheepDog-One
SheepDog-One's picture

You dont get it? Crackhead equities just got a Pavlovian jolt.

Thu, 05/17/2012 - 10:20 | 2435249 Dr. Engali
Dr. Engali's picture

Print Ben Print! I want to pay off my mortgage with an Oz of gold.

Thu, 05/17/2012 - 10:20 | 2435251 SmoothCoolSmoke
SmoothCoolSmoke's picture

Dow spike!  QE 3 junkies have hopium!

Thu, 05/17/2012 - 10:20 | 2435253 razorthin
razorthin's picture

Aaaannd one more data point offering hope of QE3 for the addicts; market celebrates off its lows.

Thu, 05/17/2012 - 10:23 | 2435274 Doubleguns
Doubleguns's picture

Yep, the dancing clowns have arrived. The court jesters (fools) will soon follow.

Thu, 05/17/2012 - 10:21 | 2435260 Caviar Emptor
Caviar Emptor's picture

Welcome to the new normal. Prices paid still rising while business activity and employment decline. Biflation

Thu, 05/17/2012 - 10:22 | 2435263 vote_libertaria...
vote_libertarian_party's picture

aaaaaand stocks about to go green on the great news....


Bounce even higher when Moodys announces the Spain downgrade this afternoon.

Thu, 05/17/2012 - 10:31 | 2435327 SAME AS IT EVER WAS

It seems as if the algo machines are starting to abandoned, left in the buy any and all bullshit mode.  

Thu, 05/17/2012 - 10:22 | 2435268 asteroids
asteroids's picture

I suspect the political machine is losing its grip on control as summer and the election looms. We are gong to get "reality" instead of bullshit that's been spewed since 2009.

Thu, 05/17/2012 - 10:24 | 2435278 razorthin
razorthin's picture

NEVER assume it's not controlled an not by design.

Thu, 05/17/2012 - 11:31 | 2435706 FlyoverCountryS...
FlyoverCountrySchmuck's picture


Let's launch another diatribe against those "Evil Rich People", and raise taxes on the kob creators!

MAybe that will help, right?

Thu, 05/17/2012 - 10:23 | 2435270 Monkeyfister
Monkeyfister's picture

Time to give the Banksters another pallet of Free Money to set on fire, eh?


Thu, 05/17/2012 - 10:25 | 2435283 ghostzapper
ghostzapper's picture

Market still fully loaded with QE3 hopium until Spider is around 1,000.  If it gets down that far Shalom will know the element of surprise is back in his corner.  Until then too many wet panties by the morons on CNBClowns every time we get bad data or a downtick in the market. 

Thu, 05/17/2012 - 10:25 | 2435287 SAME AS IT EVER WAS

Brother can you spare some QE?

Thu, 05/17/2012 - 10:26 | 2435296 Roland99
Roland99's picture


Bungee markets!!


This is fun!

Thu, 05/17/2012 - 10:26 | 2435298 midgetrannyporn
midgetrannyporn's picture

hookers and blow for my friends on wall street courtesy of the bernank.

Thu, 05/17/2012 - 10:30 | 2435320 rosiescenario
rosiescenario's picture

Ben's manicured finger gently took up the slack as he kept both eyes on the perp. "Go ahead, make my day". The big Rgeer Blackhawk 44 magnum was loaded with plus p Hornady hollow points....this perp was about to get a turtle sized hole blown through him....anyone standing behind him wouldn't do too well either, but, hey, that was life, Ben thought....the odds were they were not part of the 1% anyway, so no big deal.

Thu, 05/17/2012 - 10:52 | 2435473 Fix It Again Timmy
Fix It Again Timmy's picture

QE!, QE! - here QEeeeeeeeeeeeee....

Thu, 05/17/2012 - 10:59 | 2435528 MFL8240
MFL8240's picture

Moving Foward!  lol!!

Thu, 05/17/2012 - 11:08 | 2435589 ABCStore
ABCStore's picture

Number of Employmees 


Thu, 05/17/2012 - 11:58 | 2435826 Snakeeyes
Snakeeyes's picture

Look at charts of Consumer Comfort, Philly Fed and Jobless Claims miss together. This news is miserable.

Bernanke loves the smell of QE in the morning!

Thu, 05/17/2012 - 14:32 | 2436536 UP4Liberty
UP4Liberty's picture
How well does the Fed protect the purchasing value of the dollar? *Texas Straight Talk, by Congressman Ron Paul, May 14, 2012:

''First, it is important to understand the Federal Reserve System.  Some people claim it is a secret cabal of elite bankers, while others claim it is part of the federal government.  In reality it is a bit of both.  The Federal Reserve System is the collusion of big government and big business to profit at the expense of taxpayers.  The Fed's bailout of large banks during the financial crisis propped up poorly-run corporations that should have gone under, giving them a market-distorting advantage that no business in the United States should receive.  The recent news about JP Morgan is a case in point.  JP Morgan, a recipient of $25 billion in bailout money, recently announced it lost another $2 billion.  If a corporation shows itself to be a bottomless money pit of 'errors, sloppiness and bad judgment,' the Fed shouldn't have expected $25 billion in free money to change that or teach anyone a lesson in fiscal discipline.  But it determined that this form of deliberate capital destruction was preferable to one business suffering bankruptcy.''

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