The signs are beginning to look grim that we’ll avoid a recession if we are not already in one.
Some key real-time indicators of U.S. manufacturing conditions are starting to flag worrying signs of a downturn — a canary of sorts in the macroeconomic coal mine.
Why it matters: When viewed in isolation, monthly business condition surveys conducted by several regional Federal Reserve banks tend to be volatile. But right now, they’re all pointing in the same direction: Many show an outright contraction of factory activity in June.
They raise the possibility of a slump in the manufacturing sector, which accounts for 12% of economic output, and where ups and downs typically coincide with the overall economic cycles.
Driving the news: This morning, the Richmond Fed said that its composite index of manufacturing — in a region that stretches from South Carolina to Maryland — fell to its lowest level since the depths of the pandemic two years ago.
That followed similarly gloomy June readings in recent days from indices prepared by Fed banks in Kansas City, Missouri; Philadelphia; and Dallas.
What they’re saying: “The numbers confirm our growing fears that the U.S. economy is in the midst of an economic downturn, and particularly on the goods side,” Peter Boockvar, chief investment officer at Bleakley Advisory Group, tells Axios.
What’s going on: Factories have faced a toxic brew of recent issues, including soaring costs and material shortages. But now, a slump in new orders has pushed all but one of the Fed indices into the red, signaling a contraction in the sector.
Axios Macro By Neil Irwin and Courtenay Brown · Jun 28, 2022