Prometheus Research Profile picture
Jun 20, 2023 18 tweets 5 min read Read on X
On Industrial Production & PMIs

1. As of the latest available data, our PMI composite now shows a reading of -10.93. PMIs are generally strong directional indicators of where we are in the profit cycle. Image
2. This is because PMI respondents manage inventories and orders in response to their outlook on revenue and profitability.
3. Nontheless, we ived some degree of mixed messaging from incremental PMI data points. n particular, Empire Manufacturing PMIs showed sequential improvement, while Philadelphia Fed PMI worsened.
4. The latest New York Fed manufacturing survey data showed an expansionary reading of 6.6, surprising consensus expectations of -15.1. This reading was a sequential acceleration within an accelerating trend. Image
5. As we can see above, there tends to be considerable noise in month-to-month changes in the index. Nonetheless, this print was marginally positive, while the three-month trend remains negative. Additionally, we also showcase that sub-surveys of the index generally worsened: Image
6. While Empire showed positive changes, Philadeplhpia Fed PMI worsened. The latest Philadelphia Fed manufacturing survey data showed a contractionary reading of -13.7, disappointing consensus expectations of 0. Image
7. This reading was a sequential deceleration within an accelerating trend. The largest gaining segment was Shipments, and the largest slowdown was in Prices Paid. The breadth of the sub-index data remained weak as well. Image
8. Therefore, a comprehensive take suggests flat PMI conditions at best, if not worse. This PMI data is a timely reflection of the ongoing deterioration in manufacturing activity, which we see as weak industrial production data. We explore this next.
9. The latest data for May shows Industrial Production declined, coming in at -0.16%. This print disappointed consensus expectations of 0.05% and contributed to an acceleration in the three-month trend relative to the twelve-month trend: Image
10. We break this print into its contributions from production coming from Food (-0.04%), Energy (-0.05%), Autos (0.04%), and All Other Items (-0.11%).
11. Additionally, we also showcase the top 10 contributions by industry. The largest contributor this month was Fuels, and the largest detractor was Converted fuel: Image
12. We zoom out to offer further context on the dynamics of industrial production. Over the last year, industrial production has expanded by 0.23%. Image
13. Over the last few decades, the importance of food, energy, and automobiles has risen, accounting for a significant amount of the variation in industrial production.
14. Over the last year, food, energy, and automobiles have contributed 0.73% to the 0.23% change in industrial production. We show this impact below: Image
15. To further assess the health of the current expansion of industrial production, we examine the diffusion of the 28 subsectors we track. This involves examining the number of industries that are expanding versus those that are contracting.
16. We find that 61% of industries are contracting. Below, we visualize how a diffusion index has generally been a good barometer of the durability of upturns and downturns in industrial production: Image
17. To elaborate further, currently, 11 industries are expanding and contributing 1.56% to industrial production, compared to 17 industries showing contraction and detracting -1.42% from industrial production growth compared to one year prior. Image
18. Overall, the latest data continues to suggest #weakness in the manufacturing sector, and given cyclical dynamics, these pressures are likely to intensify.

• • •

Missing some Tweet in this thread? You can try to force a refresh
 

Keep Current with Prometheus Research

Prometheus Research Profile picture

Stay in touch and get notified when new unrolls are available from this author!

Read all threads

This Thread may be Removed Anytime!

PDF

Twitter may remove this content at anytime! Save it as PDF for later use!

Try unrolling a thread yourself!

how to unroll video
  1. Follow @ThreadReaderApp to mention us!

  2. From a Twitter thread mention us with a keyword "unroll"
@threadreaderapp unroll

Practice here first or read more on our help page!

More from @prometheusmacro

Sep 26
Notes From Prometheus Multi-Strategy 🤖

The Prometheus Multi-Strategy Program is our primary offering to institutional investors, systematically trading 40 global markets.

We share the latest macro insights coming from this process:

1/ Jobs Cycle Slowing? Image
2/ Jobless claims disappointed expectations, but the level of claims remains far from recessionary territory—slowing, not contracting. Image
Image
3/ Relative to cycle lows, claims are at ~31% vs ~18% where recessions typically begin—stress is rising but still muted. Image
Read 7 tweets
Sep 25
Notes From Prometheus Multi-Strategy 🤖

The Prometheus Multi-Strategy Program is our primary offering to institutional investors, systematically trading 40 global markets.
We share the latest macro insights coming from this systematic process:

1/ Housing Green Shoots? Image
2/ New home sales surged +20.9% in August (vs –0.3% expected). Y/y single-family sales ~+3.2%. Big print; high volatility. Image
3/ However, completed homes sold has been driving this trend.

Not the strongest indication for ongoing activity: Image
Read 8 tweets
Sep 24
Notes From Prometheus Multi-Strategy 🤖

Prometheus Multi-Strategy Program is our primary offering to institutional investors. The program systematically trades 40 global markets.

We share the latest macro insights coming from this systematic prices:

1/ Construction Cracks. Image
2/ Construction is rolling over.

Spending is contracting in both residential & nonresidential.

Our systems are reducing equity risk, expanding bond shorts, and holding gold/TIPS. Image
3/ Construction spending fell –2.8% y/y.
– Residential –2.2%
– Nonresidential –0.6%
Both major sectors are in contraction. Image
Read 8 tweets
Sep 9
Keep Your S&P 500, But Own Some Protection?

$SPY is the core exposure for many. While the S&P 500 is a good asset over the long term, it can have big drawdowns.

What if you can keep all your S&P 500, but protect some of the downside?

1/ Enter Crisis Protection Program Image
2/ For a variety of reasons, many investors want to maintain passive exposure to the S&P 500. But the stock market can go through periods of very weak performance.

Our Prometheus Crisis Protection Program seeks to offer a diversifier during these periods of underperformance.. Image
3/ It does so by rotating between gold, TIPS, and VIX futures.

Often, though, diversification can come at a price, i.e., reduced upside exposure to equity market rallies.

However, using a little bit of portfolio engineering, we can maintain all the equity upside...
Read 11 tweets
Sep 8
Prometheus Crisis Protection Program 🔥🤖🚀

A Portfolio With A 2.0 Sharpe Ratio During $SPY Drawdowns

The program seeks to offer a diversifier during periods of financial instability using $GLD, $TIP, & $VIXY

Launch Discount: 33% OFF.

1/ Our process 🧵 Image
2/ Most investors are seeking to either match S&P 500 returns or outpace them over the long term. Regardless of whether investors seek to match our outperform equity returns, most investors seek higher risk-adjusted returns than simply holding market beta...
3/ These higher risk-adjusted returns can be achieved in two ways: time exposures to equity markets or increased diversification.

Our Crisis Protection Program leans primarily on diversification to create a portfolio that is biased to outperform during equity market downturns
Read 11 tweets
Aug 10
Is The Current Labor/Output Relationship Sustainable?

In recent months, employment has softened significantly after a period of strength. This has often prompted the question as to whether activity will fall to reflect this weaker employment growth.

1/1 9 We evaluate 🧵 Image
2/

As ever, before we describe mechanics before diving into these observations.

The core principle that drives this thread is that labor market growth via employment is the dominant driver of sustainable long-term growth in the economy.

This is because labor both earns….
3/ … and spends, and is the center point of economic activity.

Given this centrality of employment growth, it is rare in the macro economy for output to meaningfully deviate from labor market growth.

If output deviates from employment growth for a time, it is usually…
Read 19 tweets

Did Thread Reader help you today?

Support us! We are indie developers!


This site is made by just two indie developers on a laptop doing marketing, support and development! Read more about the story.

Become a Premium Member ($3/month or $30/year) and get exclusive features!

Become Premium

Don't want to be a Premium member but still want to support us?

Make a small donation by buying us coffee ($5) or help with server cost ($10)

Donate via Paypal

Or Donate anonymously using crypto!

Ethereum

0xfe58350B80634f60Fa6Dc149a72b4DFbc17D341E copy

Bitcoin

3ATGMxNzCUFzxpMCHL5sWSt4DVtS8UqXpi copy

Thank you for your support!

Follow Us!

:(