Manufacturing has been one of the few bright spots in an otherwise lackluster economic recovery. Inventories are tight, overseas demand has picked up and most surveys of the sector point to further increases in production.
But today’s release of the Philly Fed Index is somewhat surprising and may be pointing to an eventual slowdown in manufacturing. The index fell from a reading of 21.4 in May to 8.0 in June. Zero marks the line between expansion and contraction.
The survey of mid-Atlantic manufacturing can be volatile as the chart above reveals, but it has also been a good predictor of future activity. June’s big drop may just be a one month aberration, but the index is worth keeping an eye on.
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