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As I stated in the today’s Early Look, until the consensus begins to catch up with the weakening reality, reporting risk continues to be to the downside of expectations. 

Consistent with that theme, the Empire Manufacturing Index fell from 19.6 to 5.1 in July.  Consensus expectations looked for a level of 18.  The index has fallen a cumulative 27 points from the 2010 peak of 31.9 reached in April.

  1. New Orders Index dropped 7 points to 10.1.
  2. Shipments Index fell 13 points to 6.3.
  3. Unfilled Orders Index declined 15 points to -15.9 (its lowest level since December).
  4. Delivery Time Index turned negative (a sign that delivery times had shortened)
  5. Inventories Index rose from a level near zero to 6.4 (inventories are building after holding steady in May and June).

Along those same lines, the Federal Reserve Bank of Philadelphia’s factory survey index fell to 5.1 in July from 8 last month, again missing consensus estimates.  A Bloomberg survey forecast the measure would rise to 10. 

Lastly, the Fed showed industrial production rose 0.1% June, boosted by utility output (hot weather), while manufacturing declined 0.4%.  On this factor, the consensus was bearish enough at -0.1%.

No matter where you turn there it is - growth is slowing!  Taken together, NY, NJ and PA make up 15% of the nation’s economy and the market is trading down over 1% on the news. 

Tomorrow, we get the preliminary look at the July University of Michigan Consumer Sentiment Index.  The consensus is looking for 74 vs. 76 last month.  Given the plunge in the most recent Conference Board confidence reading, reporting risk continues to be to the downside of expectations. 

Howard Penney

Managing Director