Macro Morsels: Manufacturing's Descent

Manufacturing is slowing across multiple measures, first with the surprise drop in the Empire State Index to -24.6 vs the expected reading of -7.9. The prior reading was 5.8.

Business activity declined significantly, led by new orders falling and a moderate drop in shipping.

We also saw the Philadelphia Fed Index register a negative reading of -23.2. Up one point from the prior reading, but in negative territory for seven months in a row. The expectation was for a more meaningful rise to -14.7.

New orders and shipments both declined to their lowest readings since May of 2020, showing pronounced weakness.

With 10 months in a row of declining leading economic indicators it is quite likely that we are headed toward a recessionary environment. We expect economic conditions to continue to decline in terms of manufacturing as inventories were built out in the fourth quarter of 2022 without significant uptake from downstream businesses as well as consumers.