Regional Fed Report Foreshadows Tougher Times For Manufacturers

A bellwether regional Federal Reserve study Thursday continued to pour on the bad news for those hoping manufacturing could continue to bolster overall economic growth despite lagging in other sectors.

The Philadelphia Fed’s index tracking manufacturing conditions in its region, seen as a solid indicator for several other areas around the nation, declined to its lowest point since March 2009. The manufacturing industry index fell to a level of – (negative) 30.7, well below what is considered a neutral rating (zero). News of stagnant and/or slowing conditions mirrors findings in recent months within the Credit Manager’s Index (CMI), prepared by NACM Economist Chris Kuehl, PhD.

While far from a crash thus far, the noticeable slowing of orders leaves few silver linings. The Philadelphia Fed study also found the following:
  • Demand for manufactured goods paralleled the decline in the general activity index, falling 27 points.
  •  About 29% of the firms had scheduled shutdowns or slowdowns during the summer months this year.
  • About 40% said that seasonal factors have a significant influence on monthly production levels.
  • The current employment index fell 14 points to -5.2, recording its first negative reading in 12 months.
Manufacturing had carried the economy throughout 2010 and much of 2011. However, the sector is starting to bear more noticeable scars from the lack of the long-predicted, but absent, strong economic rebound.

Brian Shappell, NACM staff writer

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