The Economic News Continues to Degrade

Stocks are up today! But the economic news isn't! I just read this quote by Michael Snyder:
"It is going to take a miracle for the U.S. economy to pull out of this tailspin, because the economic numbers are really starting to deteriorate very rapidly now.  On Tuesday we got some more new numbers, and they were just as bad as we thought they might be.  But even before today’s numbers all of the data were telling us the exact same thing.  The New York Fed’s Empire State manufacturing index just suffered the worst one month decline in U.S. history, Morgan Stanley’s Business Conditions Index just suffered the largest one month decline that we have ever seen, global trade numbers are the worst they have been since the last recession, and just last week I detailed the complete and utter “bloodbath” that we are witnessing in the U.S. trucking industry right now."
You can read his full article here.
And this is even more bad news:

Empire Ignored: Terrible, But Wall St Rises Anyway!

from Stone McCarthy:"You usually don't get three straight months of negative results unless you are in a recession (Note: NY Fed historical data only started in July 2001)." SMRA continues: "If that's not bad enough for you, the forward-looking new orders index fell to -7.8 in August, after posting -5.5 in July and -3.6 in June. Not only is the latest reading a new low in the recent string of negative results, it's also the third straight month of contraction."

There is no way to sugar-coat the latest Empire State Index. It's terrible! New orders are at the worst level in a decade? That's just plain ugly! And the general conditions index dropped a dreadful 20 points in a single month! Clearly, economic conditions are deteriorating rapidly!

from Zero Hedge:
The first August leading indicator starts off with a thud, after the Empire State manufacturing index just confirmed that the recent brief push higher was, well, transitory. Printing at -7.72, on expectations of 0.00, down from -3.76, the first diffusion index of the month just saw a third consecutive contractionary print in a row, setting the stage for much more ugliness in August. The summary was succint: "Business conditions continue to deteriorate: "The general business conditions index fell four points to -7.7. The new orders index also fell, inching down to -7.8; the negative reading—the third in a row—indicated that orders had declined. The shipments index held steady at 3.0, a sign that shipments were slightly higher over the month. The unfilled orders index continued to drift down, falling three points to -15.2. The delivery time index was little changed at 0.0. The inventories index dropped two points to -7.6, suggesting that inventory levels were down slightly." What is surprising is not that the current outlook is deteriorating, but that for the first time, the future index finally cracked as the hopium has finally ran out: "The future general business conditions index fell twenty-four points to 8.7, its lowest level since February 2009. The future new orders and shipments indexes dropped to their lowest levels since September 2001." I.e., hope is no more. And there is nothing to take its place.

Empire Manufacturing Disappoints Market, Too!

But stocks are positive again. I won't touch this market as long as Wall Street continues to ignore all the horrific economic data. 

from Zero Hedge:


So much for the Empire Manufacturing index being a harbinger of an economic pick up. With virtually everyone on Wall Street expecting a positive print, with the average at +5.00, the actual number of -3.76 comes as yet another confirmation of the (f)utility of Wall Street groupthink. While it was a modest bounce from the June -7.79, this first July manufacturing indication, which coming negative means the contraction is now well into its second month, and has ugly undertones for Q3 GDP, which we expect most banks will revise their expectations lower in the aftermath of yesterday's JPM downgrade of the US economy. And while there was some good margin news with Prices Paid dropping by 13, or more than Prices Received which declined by 6 points, a far more troubling indicator this month is the collapse in the Number of Employees Index to 1.11 from 10.20, or the lowest of 2011. This is not good for July NFP numbers after the already atrocious June employment data. Elsewhere on the inflationary front, CPI missed expectations of a -0.1% drop, instead printing at -0.2%, the lowest since June 2010. The reason was the 4.4% plunge in the Energy Index, the largest drop since December 2008. That said, the core CPI was unchanged at 0.3%, higher than expectations of 0.2%, due to increases in prices for shelter, apparel, new vehicle, used cars and trucks and medical care. In other words: all the things that people need right after food and gas. We would venture to guess that in addition to S&P < 1,000, core CPI coming in negative is the other QE3 gating factor.

Stagflation Rages, Manufacturing Falters

Is it any wonder both both stocks and treasuries plunge on this news? Treasuries are now recovering, but higher inflation is going to take its toll, as it did yesterday. 

from Zero Hedge:


June brings us much more centrally planned stagflation. CPI increased 0.2% in May, higher than expected 0.1%, and up 3.6% Y/Y. This is the 11th consecutive increase in inflation. And so much for the CPI ex-Food and Energy which came at +0.3% on expectations of 0.2%, up from 0.2% in April: "The index for all items less food and energy increased 0.3 percent in May, its largest increase since July 2008. The indexes for apparel, shelter, new vehicles, and recreation all contributed to the acceleration, rising more in May than in April. These increases more than offset declines in the indexes for airline fare, tobacco, and personal care." More on the Chairman's failure to rein in inflation in 15 minutes: "The food index rose in May as well. The food at home index repeated its April increase of 0.5 percent as four of the six major grocery store food group indexes increased, with the index for meats, poultry, fish, and eggs rising the most. In contrast, the energy index, which had been rising sharply, declined in May. The gasoline index decreased for the first time since last June, although the index for household energy increased. The upward trend among the 12 month increases of major indexes continued in May. The 12 month change in the all items index, which  was 1.1 percent as recently as November, reached 3.6 percent in May. The energy index has increased 21.5 percent over the last 12 months, the food index has risen 3.5 percent and the index for all items less food and energy has increased 1.5 percent. All of these figures have been rising in recent months." But the real action was in the Empire Manufacturing Index which plunged from 11.88, and forget about expectations of 12.00, printing at -7.79 in June. The contraction is now confirmed. This is the first contraction since November 2010 when QE2 began. Hint: QE3 is coming. Also, the future general business conditions index fell thirty points, reaching 22.5, its lowest level since early 2009. And the kicker: margins continued to collapse as prices paid fell less than prices received. This is what stagflation is pure and simple; it has also been Zero Hedge's keyword of 2011 since January.
From the Empire State Mfg Index:
The Empire State Manufacturing Survey indicates that conditions for New York manufacturers deteriorated in June. The general business conditions index slipped below zero for the fi rst time since November of 2010, falling twenty points to -7.8. The new orders and shipments indexes also posted steep declines and fell below zero. The index for number of employees dropped fifteen points to 10.2. The indexes for  both prices paid and prices received were positive but lower than last month, suggesting that increases in input prices and selling prices had slowed. Although future indexes were generally above zero, they were well below last month’s levels, indicating that the level of optimism  about the six-month outlook had deteriorated significantly.
In June, the general business conditions index fell below zero for the first time since November of 2010, declining a steep twenty points to -7.8. Eighteen percent of respondents—compared with 23 percent in May—reported that conditions had improved over the month, while 25 percent, up from 11 percent last month, reported that conditions had worsened. The new orders index fell twenty-one points to -3.6, and the shipments index tumbled thirty-four points to -8.0. The unfi lled orders index fell to zero. The delivery time index slipped fi ve points to -3.1,  and the inventories index dropped ten points to 1.0.
Level of Optimism Deteriorates Significantly
The six-month outlook was notably less optimistic in June than in May. The future general business conditions index fell thirty points, reaching 22.5, its lowest level since early 2009. While the index was still above zero—an indication that conditions were expected to improve in the months ahead—its June decline represented the second largest drop in the index in the history of the survey. The future new orders index fell thirty-two points to 15.3, and the future shipments index fell twenty-fi ve points to 17.4. The future inventories index retreated thirteen points to -9.2, suggesting that manufacturers expected inventory levels to fall over the next six months. Future price indexes fell but remained positive, implying that price increases were expected, but would occur at a slower pace than was expected last month. The index for expected number of employees fell fourteen points to 6.1, and the future average workweek index fell to -2.0. The capital expenditures index slid four points to 26.5, and the technology spending index dropped fi fteen points to 14.3.
And the kicker: Margins continue to collapse as drop in Priced Paid is smaller than in Prices Received:
Price indexes posted their first declines in several months. The prices paid index fell fourteen points, to 56.1–still a relatively high value, but a sign that price increases were smaller in June than in May. The prices received index retreated seventeen points to 11.2, with the share of respondents that reported an increase in selling prices falling from 33 percent last month to 17 percent this month. Employment indexes were also lower. The index for number of employees remained in positive territory, indicating that employment levels increased, but the index fell fifteen points to 10.2. After reaching a relatively high level last month, the average workweek index tumbled twenty-six points; at -2.0, the index suggested that hours worked fell slightly.
Summary:

Monthly CPI:

Retail Sales Higher, But Tepid. Empire Manufacturing Contracts Sharply

Ouch! This represents a 25 point drop in one month, and a far cry from expectations!

WASHINGTON (MarketWatch) — Conditions for New York area manufacturers deteriorated sharply in November, with a regional survey turning negative for the first time since June 2009.

The Federal Reserve Bank of New York's Empire State manufacturing survey fell to a reading of negative 11.1, a far cry from the 15.7 seen in October, according to data released Monday. The release was far worse than economist expectations for a 15 reading and marks the first negative level since July 2009.

A steep drop in the new-orders components of the index, as well as a big drop in shipments, sent the reading into negative territory.
Indexes for both prices paid and received declined, with the latter also falling into negative territory — worrying for the Federal Reserve, which has publicly fretted about the prospect of deflation in the U.S. economy.
The prices paid index fell from 30 to 22.1, while prices received dropped to -2.6 from 8.3.
“While the New York region is just one slice of industrial activity across the country, this does suggest that margin compression is becoming a reality,” said Dan Greenhaus, chief economic strategist at Miller Tabak.

from Yahoo finance:

New York state manufacturing unexpectedly plunged in November, the first contraction since July 2009 when the US economy exited recession, official data showed Monday.
The Federal Reserve Bank of New York reported its manufacturing activity index dropped to minus 11.1 points in November, from a positive 15.7 points in the previous month.
The Empire State Manufacturing Survey index is considered a bellwether of the manufacturing sector which has been a key strength in the economic recovery.
It was the first time the index fell below zero since July 2009, the month after the worst recession in decades was officially declared over.
The sharp 27-point decline surprised analysts, who had forecast on average a slip to a positive 11.7-point reading.
The new orders index plummeted to minus 24.4 points, from positive 12.9 points in October.

Empire State Index Sends Out Bad Omen

But stock futures are rising!

WASHINGTON (MarketWatch) -- Conditions for manufacturing in the New York region softened a bit in September from August and remained well below levels of earlier in the summer, the New York Federal Reserve Bank said Wednesday. The bank's Empire State Manufacturing index fell to 4.1 in September from 7.1 in August. This is the lowest level since July 2009. Economists had forecast a small gain to 7.5. While positive, the index is well below the high of 31.9 in April and 19.6 in June and suggests growth at a tepid pace. The details of the report were stronger than the headline. After falling below zero last month, the new orders index turned positive. The employment index improved slightly.

Empire Index Disappoints

from Zero Hedge blog:
The Empire State Mfg index rose modestly from 5.08 to 7.1, yet still missed expectations of 8.0. In a nutshell, price indexes fall, the employment indexes climb, and most critically, as this is a survey after all, the degree of optimism continues to weaken.

From the release:
The Empire State Manufacturing Survey indicates that conditions improved modestly in August for New York manufacturers. The general business conditions index rose 2 points from its July level, to 7.1. The new orders and shipments indexes both dipped below zero for the first time in more than a year, indicating that orders and shipments declined on balance; the unfilled orders index was also negative. The indexes for both prices paid and prices received inched down, while employment indexes were positive and higher than last month. The six-month outlook weakened; though future indexes were generally still positive, many fell in August, with the notable exceptions of the future employment and capital expenditures indexes, which climbed after falling last month.
In a series of supplementary questions, manufacturers were asked about their capital spending plans. Looking ahead to the next six to twelve months, 37 percent of respondents indicated that they expected to increase capital spending relative to its level in the past six to twelve months, while just 13 percent planned reductions. Of those predicting increased capital spending, 27 percent noted that "a considerable fraction" of the increase reflected investment that had been postponed because of the recession; 41 percent of respondents had given this same response in a similar survey back in January. Another 46 percent of those surveyed this month attributed "some" of the spending increase to the recession. The most commonly cited factors behind increased investment were high expected growth in sales and a need to replace capital goods other than IT (information technology) equipment. The most widely cited factors behind steady or decreased capital investment in the current survey were low expected sales growth, low capacity utilization, and limited need to replace non-IT capital goods.
Growth in Business Activity Remains Modest
The general business conditions index inched up two points in August, to 7.1. Still close to its July value, the index reading suggested that business activity improved over the month, but at a very modest pace. Roughly 30 percent of respondents reported that conditions had improved, while 22 percent reported that conditions had worsened. The new orders index fell below zero for the first time in over a year, dropping 13 points to -2.7—an indication that, on balance, manufacturers saw orders decline slightly. Following this same pattern, the shipments index also moved below zero, dropping 18 points to -11.5. Since April, this index has fallen a cumulative 44 points. The unfilled orders index was in negative territory for a fifth consecutive month, but inched up 6 points to -10.0. The delivery time index rose to zero. The inventories index was positive again in August, but fell a few points to 2.9.
Price Indexes Fall, Employment Indexes Climb
Both price indexes declined. Continuing its downward trend for a third consecutive month, the prices paid index fell 5 points to 20.0, suggesting that the pace of input price increases slowed. The prices received index, at -2.9, remained negative for a second consecutive month, a sign that selling prices were slightly lower in August. Employment indexes were positive and higher than in July, indicating that employment levels and the average workweek expanded in August. The index for number of employees had fallen in June and July, but climbed 6 points, to 14.3, this month. The average workweek index had dipped below zero last month, but rose 17 points to 7.1.
Degree of Optimism Continues to Weaken
Future indexes were generally positive, indicating that manufacturers expected conditions to improve in the months ahead. Nevertheless, many indexes fell in August, a sign that the level of optimism was slipping, as it had for the past few months. The future general business conditions index fell 6 points to 35.7, a reading well below the levels observed earlier this year. The future new orders index dipped 3 points to 31.4, and the future shipments index retreated 6 points to 25.7. The future prices paid index dropped 11 points to 30.0, while the future prices received index increased to 22.9. Future employment indexes rose: the index for expected number of employees climbed to 20.0, and the future average workweek index advanced to 7.1 after dipping below zero last month. Reversing two months of decline, the capital expenditures index moved up 9 points to 22.9. The technology spending index rose to 8.6.