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US Manufacturing Industry: Not a recession - Wells Fargo

Discussion in 'Fundamental Analysis' started by FXStreet_Team, Jan 11, 2016.

  1. FXStreet_Team

    FXStreet_Team Well-Known Member Trader

    Oct 7, 2015
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    FXStreet (Córdoba) - According to analysts from Wells Fargo, manufacturing activity in the US stalled but not recessed; they mentioned that periods of flat manufacturing activity have not always been followed by an industry recession.

    Key Quotes:

    “The combined effects of a strong U.S. dollar, tepid foreign demand and plunging commodity prices have the U.S. manufacturing sector up against the ropes. The one-two punch of back-o-back contractionary readings from the ISM manufacturing index sets back that bellwether of the factory sector to its worst reading since the recession.”

    “It is not just the ISM. Many of the regional purchasing manager surveys have been in contraction territory for the better part of the past year. The soft data from these surveys are underscored by hard data, which has revealed an outright decline in factory orders and a string of weak industrial production figures in recent months.”

    “We take the criteria used by the National Bureau of Economic Research (NBER) when determining economy-wide recessions and adapt it specifically to the manufacturing sector. By this method, factory activity is clearly in a rough patch, but we would stop short of declaring a “manufacturing recession.” As manufacturing recessions have historically led economy-wide recessions, this should allay fears that the recent weakness in the industrial sector has the broader economy on the precipice of recession.”

    “Moreover, despite the litany of negative news for manufacturing, our analysis of the four key variables (production, employment, real income and real sales) makes clear that these challenges do not amount to a manufacturing recession. On that basis the rampant concerns about a manufacturing led recession are overblown, at least at this point, in our view.”
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