Thursday, June 17, 2010

The Philadelphia Fed Survey says ...

A bit late, but we thought to say a few things about the Philadelphia Federal Reserve survey, which is viewed as an indicator of the health of the manufacturing industry in that region.  It was released this morning and came in significantly below estimates. It was 8.0 for the month June versus May's 21.4 and analyst estimates of 22.0. 

What stood out was the number of employees and average employee workweek indices, both of which declined into negative territories, suggesting contraction in June. 

In terms of how those manufacturers view everything six months from now, they remain hopeful. The future index increased from 37.0 to 40.2. We must note that the number of employees index declined to 19.5 from 30.1, indicating the manufacturers' unwillingness to increase headcount. Of course they are more than willing to squeeze as much work out of their employees as they can, indicated by the average employee workweek for the next six months going up to 25.2 from 14.6. Lastly, capex will not be growing during the next six months as much as the manufacturers had indicated in May. The capex index for the next six months declined to 3.0 from 7.0. 

The possibility of a slower, weaker and potentially contracting 2H '10 is increasing.

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