Manufacturing data can be bumpy each month at the regional level. But it is that regional data that makes up the whole nation after all regional data are added up. So what happens when the economy is hoping for the recovery to continue without the help of government stimulus when three regional manufacturing reports are showing different data?
Regional Federal Reserve reports can have an impact on the financial markets. While they are regional, they are current month readings that are considered “live” rather than covering data from the prior month or two as is seen with most economic reports.
Monday’s Empire State Manufacturing Index from the Federal Reserve Bank of New York did show that the recovery is holding. That said, the general index reading of 6.3 was barely half of what was expected and it represented slower growth than what had been seen in October.
One issue that may weigh on the economy is that there has been no fiscal stimulus package passed. The August package was never delivered, and the economy was able to hold tough for most of the time. It remains unclear just how much stimulus is needed, and it is still a hot debate, but the surge in new COVID-19 cases is posing a new risk as more lock-downs or restrictions are being announced to combat the spread of COVID-19.
A report from the Federal Reserve Bank of Philadelphia on Thursday came in stronger than expected, but at a slower growth trend than in October. The Philly Fed Manufacturing Index came in at 26.3 in November. This beat the Econoday forecast of 24.5, but it was under October’s 32.3 reading. New orders and shipments have been strong, but October was showing multi-decade highs.
According to the Philadelphia Fed survey, the indicators remained positive for the sixth straight month but slower than in October. These included general activity, new orders, and shipments. Employment increases were more widespread in November and most of the future readings were still pointing toward firms expecting growth over the next six months.
The Philly Fed also noted that 42% of firms reporting overall increases in November, with just 15% reporting decreases. Still, the 49% of firms reporting increases in new orders in November was down from 55% in October. About 41% of firms reported higher shipments in October, down from 57% in October.
The third report, which was released on Thursday, was the Kansas City Fed Manufacturing Index. The index was positive at 11 in November, but that was still soft versus the 13 level in October. The local report was considered to be modest growth, and the regional Fed report showed that local manufacturing activity remained below levels seen a year ago. Expectations for future activity were shown to have remained solid.
According to the Kansas City Fed, several trends were issued within industries. The production of primary metals and nonmetallic mineral products slowed, but the manufacturing of transportation equipment gained. While most readings were positive and were indicating continued expansion, the Fed noted that production, shipments, new orders, and employment all rose at a slower pace.
It is all in all good news that the recovery has continued, but slower growth at the same time when coronavirus cases are surging may be a bad recipe for an economy that is still quite fragile.