Article / 15 June 2016 at 4:56 GMT

3 Numbers: US industrial output set to slip back into the red

editor/analyst /
United States
  • The New York Fed Manufacturing Index projected to show contraction for June
  • US industrial activity in May is on track to fall after a sharp rise in April
  • Soft data for the leading economy is a worrying sign for the global GDP outlook
  • Today’s updated Fed forecasts will be closely read for its "hike" potential

By James Picerno

A wave of US economic news is on tap today, including an early look at the June economic profile via the New York Fed Manufacturing Index. Later, we’ll see the monthly update on US industrial output for May. The main event for Wednesday follows with the release of the Federal Reserve’s monetary policy statement, a new round of quarterly forecasts, and Janet Yellen’s press conference.

US: New York Fed Manufacturing Index (1230 GMT) Today’s data from the New York Fed offers an early look at June macro review for the US. To the extent that this early look at the economic profile is useful, economists are expecting more of the same: falling output.

After a brief rebound into positive territory in March and April, the New York Fed’s headline benchmark slipped back into the red for May.

The negative 9.02 reading for last month is expected to ease a bit in today’s June report.’s consensus forecast projects a modestly higher print at negative 3.5. If so, the market will focus on the return of back-to-back negative figures.

The year-on-year slide in US industrial activity is expected to roll on through May. Photo: iStock

National benchmarks for manufacturing survey data look firmer, but not by much. Markit’s US Manufacturing PMI, for instance, dipped to 50.7 in May – just above the neutral 50 level that separates growth from contraction.

“For those looking for a rebound in the economy after the lacklustre start to the year, the deteriorating trend in manufacturing is not going to provide any comfort,” Markit’s chief economist said earlier this month.

Today’s report from the New York Fed will provide fresh context for deciding if the outlook by way of June data paints a brighter profile. Based on expectations for this index, however, there’s no sign that a convincing rebound is on the horizon at the halfway point for 2016.

US: Industrial Production (1315 GMT) In contrast with the survey figures, the hard data on industrial activity shows that the manufacturing component is relatively firm. Save for a slide in March, the Federal Reserve reports that manufacturing output was up a respectable 0.3% in April.

Note, too, that manufacturing output increased in year-on-year terms for each of the last five months. The advance is sluggish, but the persistent gains so far this year imply that the sector is in modestly better shape than the survey numbers suggest.

The question is whether the comparatively upbeat view via the hard data will persist in today’s report for May. The crowd isn’t so sure.’s consensus forecast calls for a mild 0.1% decline in industrial activity – but that translates into a sharp reversal after April’s strong 0.7% rebound, which delivered the first monthly advance since January.

The manufacturing component is expected to remain in the black, but only slightly via a 0.1% monthly increase.

In any case, one thing is clear: The year-over-year slide in industrial activity will almost certainly roll on through May. If so, the red ink in the annual column will print negative for the ninth month in a row. That’s a worrisome sign, and one that’s not about to fade any time soon.

Federal Reserve Forecasts & FOMC Statement (1800 GMT) The market’s expecting that the Fed will leave interest rates unchanged today. That’s hardly a surprise in the wake of mixed economic reports and growing worries worldwide about the potential for macro blowback if Britain votes to leave the European Union next week.

The real news for today’s Fed fest may arrive in the update of the bank’s quarterly forecast. The first order of business is learning if this year’s GDP forecast has changed.

Recall that in the March revision, the Fed pared its 2016 estimate for economic growth to a 2.1% to 2.3% range, down slightly from the December projection (based on central tendency numbers). Another slide would speak volumes about the prospects for future rate hikes.

Note, too, that the March update left the 2017 GDP forecast intact at a 2% to 2.3% range. In other words, the Fed expects already modest growth to ease further in the near term, which doesn't exactly provide aid and comfort for hawkish policy changes.

If that broad outlook remains intact in today’s release, does that lay the groundwork for hiking rates? Perhaps Janet Yellen will set us all straight, one way or another, at her press conference that begins at 1830 GMT.


-- Edited by Adam Courtenay

James Picerno
is a macro analyst/editor at Follow James or post your comment below to engage with Saxo Bank's social trading platform.


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