June's Regional Business Surveys Were Recessionary

It's hard to come up with anything positive to say about June's batch of regional business surveys conducted by five of the 12 district Federal Reserve Banks. That's because they were mostly in negative territory (chart below). They certainly add to the credibility of the recession-is-here scenario.However, the regional surveys tend to focus on manufacturing rather than services. Indeed, the averages of the five composite indexes, and their new orders and employment components, tend to closely track the comparable national manufacturing purchasing managers indexes (M-PMI).

Consumers seem to have satisfied their pent-up demand for goods and may be spending more on services now. Still, June's M-PMI, (to be released Friday) is bound to be weak. May's personal consumption expenditures (to be released Thursday) should show less spending on goods and more on services. Thursday's report should also show some moderation in the PCED inflation rate during May. However, June's regional business surveys found that prices-paid and prices-received indexes remained elevated during June.Some good news: June's regional unfilled orders and delivery time indexes suggest that supply-chain problems have eased considerably from a year ago. More good news: The M-PMIs are diffusion indexes. So after they go down, they go up.