Economic data

June IP rose .1%, better than expectations of a decline of .1%. The upside surprise was led by the utility component, which rose by 2.7%, where the very warm weather boosted output. Motor vehicle, parts production fell 1.9%, while the production of machinery, computer/electronics and mining rose. IP is now positive for 12 straight months but now faces the threat of a reduced contribution from rebuilding inventories. Following the weak July NY manufacturing survey, Philly’s manufacturing report is out at 10am.

Initial Jobless Claims totaled 429k, below the consensus of 445k and the lowest since Aug ’08 but the influence of seasonal auto shutdowns is having an impact as GM did not close down while others did. Positively, a Labor Dept economist said the decline was not just a GM thing as there were declines in a “number of different states.” Continuing Claims rose by 247k after a 203k drop in the prior week. Extended Benefits, past 26 weeks fell by another 254k after sharp drops in the previous few weeks as most likely people are falling off the rolls because of the lack of extension in the payment of unemployment insurance. Bottom line, due to the seasonal issues around the adjustments with GM doing the opposite of what they’ve historically done has made initial claims more difficult to analyze for a few weeks. One thing though is for sure, up to 3mm workers will be falling off the extended claims rolls as benefits run out.

The July NY manufacturing survey fell to 5.1 from 19.6 and was well below expectations of 18. It’s at the lowest since Dec ’09 and is the 1st July industrial report out. New Orders fell 7 pts to 10.1 and Backlogs fell 17 pts to -15.9. Shipments, which follow orders, fell 13 pts to the lowest since June ’09. The Employment component fell 4 pts to 7.9, the lowest since Feb as the average workweek fell below zero for the 1st time in ’10. Prices Paid fell 1.5 pts to 25.4 while Prices Received fell 6.5 pts to -1.6, the 1st negative report since Dec ’09. The Business Condition outlook over the next 6 months rose .5 pt to 41.3 from the June level that was the lowest since July ’09. Bottom line, the data was disappointing and if followed by other regional surveys, points to a clear moderation in manufacturing as the inventory influence wears off. One bright spot, “respondents indicated that exports accounted for a growing share of their revenues.”