Tuesday, June 22, 2010

June Richmond Fed Index Still in Record Territory

"Manufacturing activity in the central Atlantic region expanded for the fifth consecutive month, according to the Richmond Fed’s latest survey.  Looking at the main components of activity, shipments were virtually unchanged, while employment grew at a modest pace, and new orders grew more slowly. Other indicators varied."

MP: Despite the 3-point drop from the all-time high of 26 in May to 23 in June (a "skid" in manufacturing activity according to this report), Richmond regional manufacturing in June is at the second-highest level in the history of the index back to January 1994.   


At 6/22/2010 12:30 PM, Anonymous morganovich said...

is that surprising after having been at all time lows for nearly a year?

it seems to me that the key question is: "is this recovery proportionate to the decline in both amplitude and duration".

thus far this recovery, the positive amplitude of gain has not even reached half that of the negative amplitude of the decline, in marked contrast to 2001, generally considered a weak recovery, which attained a positive amplitude equal to the negative one in just a few months.

it seems to me that we ought to be concerned that this recovery is not stronger, not impressed by a high. how is this current behavior consistent with a "v" shaped recovery?

we are now coming into the more difficult year on year comparisons, so the easy gains in indexes like these are gone. we are seeing slowing across the board.

how about the existing home sales number today?

sales declined for may and inventory was up (for the second month in a row).

pricing remains at depressed levels as shown by both the case shiller and the cppi




At 6/22/2010 12:47 PM, Anonymous gettingrational said...

Morganovich cites housing sales data. TheCalafia Beach Pundit says housing news is good because of stability of prices. Richmond data is "V" and housing is "U" in the slope to sustained recovery.

At 6/22/2010 1:11 PM, Anonymous morganovich said...


how do you figure that richmond data is a "V". realize that until you are over 0 is is still going down, so most of the dramatic up slope you see was still part of the decline.

how is +23 a "v" with negative 59?

how is the half amplitude recovery of this recession a "v" relative to the much faster full amplitude recovery last time?

take a look at this chart:


this is a very tepid recovery from such a deep recession, at least measured by the standards of the average since WW2. the average recovery from a steep recession would have made up nearly the entire decline by now. we're not even halfway there.

where is this "v" you speak of? i do not see how you are getting there with this data.

regarding housing, leveling off at a depressed level is not recovery. unsold inventory building in spite of such drastic declines in new home construction bodes ill for future GDP.

the corelogic house price index is actually down since the end of the recession as is the CPPI. case shiller is flat or maybe up a tiny bit.


maybe a little early for the champagne...

At 6/22/2010 1:46 PM, Anonymous Anonymous said...

"the positive amplitude of gain has not even reached half that of the negative amplitude of the decline,"

So, George bush was better at moving the economy down than Obama at moving it up, is that your point?

There is no reason to expect a V shaped recovery: the decline was so rapid and strong it would take an extraordinary recovery to catch a V shape.

This is a specious idea that sets and unrealistic expectation. It is specisou because if you had a slow decline would you then hope for a similar slow recovery, just to get the V shape?

Of course not, you would still want a rapid recovery and you still might not get it.

At 6/22/2010 1:50 PM, Anonymous Anonymous said...

the average recovery from a steep recession would have made up nearly the entire decline by now.

How many steep and deep recessions is this premise based on?

You got data?

At 6/22/2010 2:03 PM, Blogger Bill said...

Anon at 1:46: I see the Obamatons are out there preemptively making excuses just in case this recovery is not as solid as previous recoveries following difficult recessions. Nice try but Obama deserves the blame if the recovery is a bit halting as he has been actively working against business, capital and those who typically employ others.

At 6/22/2010 2:09 PM, Anonymous gettingrational said...

morganovich, From the Richmond Fed's survey and the sustaining of recovery:

"In our latest survey, contacts remained mostly
confident about their business prospects during
the next six months, though somewhat less so
than last month."

The recovery (verb) remains and sustains.

At 6/22/2010 2:42 PM, Anonymous morganovich said...


but what does that say about a "v"? you didn't answer my question. you said in your first comment that the richmond data was a "v". how do you support that assertion?

anon 1.50 (and can you guys please pick names, it takes about 2 seconds)

it's based on 5 severe and 5 mild recessions since WW2 (which is about as far as the data goes)

chart here:


i don't have a link to the raw data, but it checks out on factset if you have access to it.

anon 1.46-

i'm really not interesting in your political postulating (as though the president is the primary driver of the economy, a clearly spurious claim). the reality is far more complex than who holds the oval office, the congress etc. it also takes place over extended time periods. CRA was a big driver (though hardly the only one) and that was clinton policy. but mostly, it's the business cycle and the fact that we supersetted a new bubble (housing and debt) onto a collapsed one preventing imbalances from being corrected and plowing them forward into the next one, making it much bigger and nastier when it came.

if you are arguing that this is not a V shaped recovery, then i agree. that said, look at the chart i linked. it shows that the average recovery from a severe recession is a V in terms of industrial production. that would seem to imply that this is a weak recovery, which is what i have been arguing. further, the recovery from mild recessions was mild. so, there is nothing specious about the claim, it's supported by fact. V shapes are the norm. it would seem that it is your claim of speciousness that is specious.

At 6/22/2010 7:59 PM, Anonymous gettingrational said...

morganovich, scroll down the last ten days of posts on CARPE DIEM. Here is a list that if we aggregate via sigma like notation it is a "V":

June 17th,
Philadelphia Fed Mfgr Index
Conference Board Leading Indicators

June 16th,
Industrial Production (The Fed)

June 15th,
ASA Staffing (ok, that's a "U")
Empire State Mfgr Summary

June 13th,
OCED Composite Indicators (31 year high)

Employment gains are slow and housing is still deleveaging but stable and better in a lot of markets. :)

At 6/22/2010 9:10 PM, Anonymous morganovich said...

i have looked at all of those, but none of them are "v" shaped.

you are confusing percentages and actual levels. the fact the the chart is back to the 20's does not mean output has recovered.

neither richmond or philly is a "v".

look again at the chart of average recoveries from severe recessions and you'll see how far off they are.

real industrial output is still at 2004 levels.

OECD will be down for may as the sotck markets will drag it down. and again, you are mistaking rate of change and actual level.

subject OECD to area under curve analysis and you see nothing like a v.

you yourself admit staffing is not a V.

unemployment has been stubbornly high.

real estate is barely a lip on a ski jump.

housing starts are way down. supply is ticking back up.

and wait until the governmental belt tightening at the state and local levels gets rolling.

m3 is shrinking, which has always (since ww2) presaged an economic slowdown in approx 6 months, though given wild swings in money supply lately, if there was going to be a time to be suspect of this indicator,

but again, you claimed the richmond data is a "V". WHY? you are just throwing a bunch of u shaped data out and claiming it's a "v". show me how recovery over time has equaled decline over time.

the data simply does not support that assertion. 11 months pre trough, we were 17% above bottom. now, 11 months after, we are 7% higher. that's only 40% of where we would be in a v.

that's a "v" and the norm for industrial output.

but it's not the case here.

not a single thing you just listed is a "v" and the national figures aren't either. calling a skunk a rose doesn't make it so.

this is a tepid recovery that is going to look slower vs year ago in coming quarters as the comparisons get hard. wait until you see q4 GDP. i fear it's going to disappoint you.

At 6/23/2010 10:26 AM, Anonymous morganovich said...


was today's home sales number good news? what does calfia beach have to say about this batch of news?

drops in units to a post WW2 (which is astounding given population growth), a 9.6% drop in year on year prices, and revisions down to the sales numbers (more that 10% reduction in the april number) in the last 2 months don't seem like good news to me.

"WASHINGTON (MarketWatch) -- Sales of new single-family homes plunged a record 33% in May to a record-low level after a federal subsidy for home buyers expired, according to data released Wednesday by the Commerce Department.

Sales dropped to a seasonally adjusted annual rate of 300,000, the lowest since records begin in 1963. April's sales pace was revised down to 446,000 compared with 504,000 originally reported. March's sales were also revised lower.

Sales fell sharply in all four regions, with sales down more than 50% in the West.

The median sales price in May was $200,900, down 9.6% from a year earlier and the lowest since December 2003"

to see just how bad this really is, have a look at this chart:


also note that apart from now, there has never been a recovery post ww2 when housing sales continued to drop once the recession ended except for 1981, which, you may recall, was a double dip.

boding poorly for the future, mortgage applications are plummeting as well.



Post a Comment

<< Home