The dismal figures from the area manufacturing sector are sending out warning signals that company activity is beginning to slow down as we move into the summer.
The most recent piece of unfavourable information emerged on Monday from the state of Texas, where an outlook survey conducted by the Dallas Federal Reserve for the sector in June indicated a substantial level of contraction that was fueled by a plunge in the growth rate of orders that could be a harbinger of worse things to come in the future.
In response to a survey question, an executive working in the paper manufacturing industry stated, “Orders are heading down, and with the Federal Reserve continuing to tighten, we think the six-month outlook for a recession is strong.”
“This is supported by both the currently placed orders and our predictions.”
The same kind of sentiments were expressed elsewhere else.
The number of orders has slowed down marginally. According to a responder working in the printing and allied product manufacturing industry, “inflation fears are worse than inflation.”
“in-quarter orders have slowed to a trickle,” an executive from a computer and electronic product manufacturing company said. This was cited as one of the “obvious symptoms of early cooling beginning.”
It was all part of an awful report that saw the overall business activity index plummet to -17.7, which measures the percent difference between enterprises seeing expansion and companies seeing contraction. All of this was included in the report. That was a decline of 10.4 percentage points from the reading in May, and it was the worst figure since May 2020, which corresponds to the beginning of the pandemic catastrophe.
Worse, the corporate outlook indicator dropped from -10 to -20.2, which indicates that management do not expect any lighter days ahead. The growth rate of orders experienced a 10.9 point drop to a value of -16.2, the number of new orders experienced a 10.5 point drop to a value of -7.3, and the number of unfilled orders experienced a 12.9 point drop to a value of -8.8.
There were only three indices that experienced positive month-over-month increases, with delivery time climbing to 19.9, an improvement of 15.6 percentage points over May. The other two indexes remained unchanged. The employment index, on the other hand, dropped 5.7 percentage points to reach 15.2; this still indicates increase, but at a slower rate than before.
Dismal outcomes are starting to materialise.
The reading from Texas is representative of a pattern of declining regional manufacturing indexes compiled by the Fed.
The index for Philadelphia experienced a drop of 6 percentage points in June, bringing it to a level of -3.3. This is also the lowest level since May of 2020. The most recent figure, which came from the Richmond district in May, decreased to -9 during that month from 14 during the previous month, which was April.
The Empire Manufacturing Survey for the state of New York actually showed improvement in June, climbing 10 points, although it was still in negative territory, coming in at -1.2.
Just one year after recording its greatest growth since 1984, the United States economy is showing signs of weakness just as concerns are mounting that it may be going into a recession. GDP declined at an annualised pace of 1.5 percent in the first quarter, and the Atlanta Fed’s GDPNow tracker is predicting growth of just 0.3 percent in the second quarter. This figure was revised slightly higher from a previous estimate of zero on Monday.
The most recent ISM Manufacturing Survey indicated growth on a national scale in May, with a value of 56.1; despite this, it was the second-lowest level since September of 2020.
Deutsche Bank, which was the first Wall Street forecaster to warn it sees a recession ahead, stated recently that while the current status of the U.S. economy likely does not fit that criterion, it’s getting closer and closer to meeting that definition.
Last week, Deutsche chief analyst Binky Chadha and others stated in a note that “in aggregate, the combination of macro indicators is compatible with a drop into recession but are not signalling we are already there.”
There was another another sign that pointed to a poor future for the economy. On Monday, JPMorgan Chase released the results of a survey which revealed that only 19 percent of company leaders at midmarket businesses feel enthusiastic about the state of the national economy. A poll that goes back 12 years shows that this is the lowest it has ever been.
