- Prior was 53.0
- Prices paid 60.0 vs 75.0 expected (prior 78.5) -- fourth largest decline on record
- Production 53.5 vs 54.9 prior
- Employment 49.9 vs 47.3 prior
- New orders 48.0 vs 49.2
It's all about the price paid number. I'm a bit confused on why the consensus was so high. The prices component measures the delta so a decline shows a slower pace of price increases, which makes sense to me given what's happened in commodities. In any case, this report is what the Fed would have hoped to see.
“The slowing in price increases is being driven by (1) volatility in the energy markets, (2) softening in the copper, steel, aluminum and corrugate markets and (3) a significant decrease in chemical demand. Notably, 21.5% of respondents reported paying lower prices in July, compared to 8.3 percent in June,” the report said.
On the downside, new orders should be a bit of a concern. There's a notable comment below about companies drawing down inventories on recession fears. That kind of thing can become self-fulfilling.
Comments in the report:
- “Material extended lead times still affecting business, and the challenging labor market is a huge factor too. Backlog is healthy; we just cannot deliver to customers due to material issues.” [Computer & Electronic Products]
- “Inflation is slowing down business. Overstock of raw materials due to prior supply chain issues and slowing orders.” [Chemical Products]
- “Chip shortages remain; however, the COVID-19 lockdowns in China are presenting even worse supply issues.” [Transportation Equipment]
- “Growing inflation is pushing a stronger narrative around pending recession concerns. Many customers appear to be pulling back on orders in an effort to reduce inventories.” [Food, Beverage & Tobacco Products]
- “New order entry has slowed down slightly; however, logistical issues have yet to improve. Long lead times for materials and labor shortages are still a major problem.” [Machinery]
- “Our markets are still holding up; however, I believe a slowdown is coming. We are cautious about going out too far with orders. Also, I believe the general market is in the beginnings of a recession.” [Fabricated Metal Products]
- “All markets are extremely busy but face headwinds that will eventually take a toll. Lead times and costs make large projects very challenging to budget, plan and execute. Routine work is also very difficult.” [Nonmetallic Mineral Products]
- “Current order books are full, but there have been signs of a slowdown beginning in the fourth quarter.” [Plastics & Rubber Products]
- “Slight improvement projected for our business for the next quarter.” [Primary Metals]
- “Continuing delivery and staffing issues have eaten away the bottom line.” [Textile Mills]