Economic data

The 1st look at June UoM confidence at 74.1 was light relative to expectations of 77.5, down from 79.3 in May and the lowest of the year. The decline was about equally spread between the two components as Current Conditions fell by 5.1 pts and the Outlook was down by 5.4 pts. One year inflation expectations were unchanged at 3.0%, matching the lowest since Dec ’10 primarily due to the recent drop in gasoline prices. As confidence is a coincident indicator and tells us nothing about the economic goings on in the future, the June decline likely reflects the lackluster labor market as seen in the data over the past few months and maybe the euro debt mess as the UoM survey is done over the phone just within the last few days thus capturing the nervousness many of us are feeling.

Industrial Production in May fell by .1%, the 2nd month in the past three that saw a decline. The consensus was for a slight rise of .1% and the weakness was broad based specifically within manufacturing as declines were seen in motor vehicle/parts, machinery and computer/electronics. Mining production rose .9% and utility output was up .8% after a 5.3% rise in April where weather normalized after the bizarre winter. Capacity Utilization was 79%, slightly less than expected, but down from 79.2% in April which was the highest since April ’08. With respect to market movements, IP is a grade B figure but notwithstanding the miss, the y/o/y gain of 4.7% is still the 3rd best over the past year. Looking forward however, the environment is obviously getting more challenging.

The 1st reported June industrial number, the NY mfr’g survey, was well below expectations at 2.3 vs the est of 12.5. It’s down from 17.1 in May and 6.6 in April and is the weakest since Nov ’11. New Orders fell 6 pts to 2.2. Backlogs fell only slightly but remained negative for the 12th straight month. The Employment component fell 7 pts to 12.4, a 4 month low and the Avg Workweek fell 9 pts to 3.1. Inventories went from +4.8 to -8.3. Prices Paid dropped almost in half to 19.6 and Prices Received fell to 1 from 12.1. The overall 6 month outlook at 23.1 is down from 29.3 in May and is the slowest since Oct ’11. Bottom line, this survey is very volatile month to month so we can’t extrapolate the state of the entire country’s mfr’g base from this one region but NY was one of the standout’s in May that is now showing its vulnerability. I’m sure we’ll see more weakness in other region’s as the global economy continues to slow.

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