The Industrial production data just released wasn’t the best, but it follows the jobs market data in showing that August has shaped up to be a bit of a dud
While the current conditions part of the Empire State data showed much promise (employment aside) the expectations part is less than rosy. .
General conditions remained unchanged in the main but there was a slip in New orders to 45.56 from 50.44. This was matched with shipments falling and unfilled orders rising which suggests supplyline issues. This is confirmed also by an expected inventory drawdown (4.35 vs 9.09 prior).
Prices aren’t looking to be a problem with prices received (32.62 vs 21.59 prior) rising at a greater rate than input prices (43.48 vs 42.05 prior). Employment is expected to fall too (14.13 vs 22.73 prior), but the work week will rise slightly (5.43 vs 0.00) prior)
The area of real worry is the investment components. Capex expectations were down to 13.04 from 18.18 in August with technology spending falling to 9.78 from 12.50 prior and it’s this type of news that the Fed will be watching closely.
The general trend for the economy is up but there are still plenty of these side factors, like investment, which need to pick up before the Fed even starts looking at rates. With QE coming to an end next month the Fed will want to start seeing the economy walking on its own two feet and making strides while off the QE meds. With reports like this, and much of the data from August so far, it’s hard to see Yellen changing tack right now and the market might think that there’s more problems to come down the line.