QI TAKEAWAY — Recession was validated in October’s Empire Manufacturing Survey, intensifying downside risks for industrial production and ultimately consumer price inflation. Echoes in other regional datapoints would augment the peak rates narrative.
- In the NY Fed’s latest Empire Mfg Survey, Current Business Conditions and six-month expectations were both negative, at -9.1 and -1.8, respectively; the last time both printed negative was February 2009, validating Bloomberg headlines of a 100% recession probability
- The Future Inventories-New Orders spread fell to -3.1 in October, the first negative read in 22 years of data and under the single-digit lows of the GFC and 2001 recessions; despite NY’s smaller factory footprint, this inversion appears to be signaling a turn in U.S. Industrial Production
- Past recessionary readings of the Future Inventories-New Orders spread preceded periods of disinflation and deflation, as is Powell’s current goal; meanwhile, Other Deposits, ~80% of M2, is at just 0.8% YoY, and should be negative by year-end as money demand shrinks