Pragmatic Capitalism

Practical Views on Money & Finance

Manufacturing – Some Red Flags

Just a few brief thoughts on this morning’s manufacturing data which continues a streak of weaker than expected data in this space.

Total industry production was very weak at -0.5%.  The manufacturing component registered a -0.4% decline.  Analysts had been expecting a 0.1% rise.  Durable goods were particularly weak at -0.6%.  Total capacity utilization declined to 77.8 versus expectations of 78.3.  In other words, this report was kind of a disaster.

As you can see in figure 1 the economy remains well below its potential.  The current readings are still consistent with many past recessionary environments.  So it’s not surprising that this environment still feels like a recession to many.  That’s because, in relative terms, we’re in the midst of a very meager recovery.

Figure 2 updates the composite real-time PMI index which declined from 2.5 to 1.1 as of this morning’s data.  In addition to the industrial production data the NY Fed reported a weak manufacturing environment with the first negative reading there since January.  The composite index is basically hugging the contraction line so manufacturing is a very weak segment of the economy.

A few key takeaways:

  • This is all consistent with a low inflation environment.  
  • This is all consistent with a muddle through environment.
  • This is not yet a recessionary environment.
  • This is nothing to cheer about.


(Figure 1 – Total Capacity Utilization)


(Figure 2 – Composite Real-Time PMI)

Got a comment or question? Feel free to contact Cullen via email here or on Twitter here.
Cullen Roche

Cullen Roche

Mr. Roche is the Founder of Orcam Financial Group, LLC. Orcam is a financial services firm offering asset management, private advisory, institutional consulting and educational services. He is also the author of Pragmatic Capitalism: What Every Investor Needs to Understand About Money and Finance and Understanding the Modern Monetary System.

More Posts - Website

Follow Me: