Are New Manufacturing Decline Stats Recession Signs?


In the Ricardo Effect, Hayek’s chief contribution to the Austrian business-cycle theory (ABCT), the turning point in the cycle from expansion to recession happens when the makers of consumer goods and services employee more workers and buy less equipment. Equipment makers face plummeting sales and rising costs for materials and labor, and therefore a profits squeeze. So they cut back on production.

Signs of that may have appeared in New York. The New York Federal Reserve released its August 2015 Empire State Manufacturing Survey reporting that the index fell to -14.9, its lowest level since 2009 in the depths of the latest recession. Naturally, economists had expected the number to be +3.86. A positive number suggests growth ahead and you can guess what negative numbers mean.

New orders for manufactured goods fell to -15.7 while shipments of finished good declined to -13.8 and inventory levels dropped to -17.3. The Fed has analyzed the index as a proxy for the future of the economy as a whole and claims that the survey “potentially offers significant information about trends in U.S. manufacturing production and employment,” and is at least as good as the surveys by the Institute for Supply Management and the Federal Reserve Bank of Philadelphia’s Business Outlook. According to the Investopedia article on the survey, the ISM survey indicates a modest slowdown while the Philadelphia one confirms the Empire State survey.
Read more at AffluentInvestor

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