Same Old Song: Bogus Philly Fed and Regional Manufacturing Reports

The Fed's regional reports have been so wrong for so long I stopped reporting on them. Just for grins let's take a peek.

Philly Fed Same Old Song

Let's tune in on two regional manufacturing reports out today through the eyes of Econoday, emphasis mine.

The song remains the same for the Philly Fed where the general business conditions index beat high-end expectations at 25.8 for February. New orders, at 24.5, are surging and unfilled orders, at 14.5, are piling up fast. Hiring is so far keeping up, at 25.2, but the acceleration in shipments is slowing, down nearly 15 points to what is however a still very active 15.5.

Price data are also strong with steady and very strong traction being shown for selling prices, where the index is at 23.9. And price expectations are jumping, both for selling prices six months from now and especially for input costs.

>For more than a year, the Philly Fed sample has been reporting the hottest conditions of any regional manufacturing survey in results that did signal, though perhaps too far in advance, what is now an uplift underway in actual government data. Watch later this morning for the industrial production report where the manufacturing component has been surprisingly soft*.

Empire State Same Old Song

Much like the Philly Fed, the sample for the Empire State report continues to report strong conditions, at 13.1 for February. New orders are at 13.5 with unfilled orders building. Shipments are strong as is hiring and the average workweek is rising. And just like the Philly Fed, price indications are heating up noticeably with input costs accelerating sharply and selling prices showing steady and very strong traction.

>Regional reports have been so strong that capacity stress, such as slowing delivery times and lack of available labor, continue to come into question. But these reports have consistently overshot actual government data, such as the manufacturing component of the industrial production which is coming up later this morning at 9:15 a.m. ET and where only modest strength is the call.

Capacity Stress?!

What a hoot. I commented moments ago Industrial Production Unexpectedly Declines.

Check out the capacity utilization numbers. It takes quite an imagination to dream of capacity constraints.​

As noted, the strength in December mostly vanished in a revision today. Subtracting a surge in utilities due to cold weather, December would have been negative.

ISM Same Old Song

GDP estimates spiked on the ISM report. One day later, on actual economic reports, it came crashing down again.

Meanwhile, can we kill the hype over these strong regional reports?

Mike "Mish" Shedlock