Manufacturing Monitor

Contributing To A Slowing Economy

Welcome to The Observatory. The Observatory is how we at Prometheus monitor the evolution of the economy and financial markets in real time. The insights provided here are slivers of our research process that are integrated algorithmically into our systems to create rules-based portfolios.

Our primary takeaways are as follows:

• While cyclical conditions remain neutral in the economy, manufacturing measures continue to show sequential contraction.

• Zooming in, factors such as a weakness in sales, low levels of production, and high labor cost pressures continue to pose significant headwinds for manufacturing profits.

• Relative to these pressures, commodities continue to price in conditions consistent with expanding manufacturing output, maintaining the opportunity for short exposures.

Manufacturing is an integral part of the cyclical economy. While manufacturing now commands a smaller portion of the GDP, it continues to be a primary driver of the variation in profitability. We visualize this importance below, by showing the contribution of manufacturing sector profits to aggregate corporate profits. As shown, manufacturing plays a strong role in setting the trend for overall profitability. Manufacturing profits have now contracted into negative territory, continuing to weigh on overall corporate profitability.