Empire State Manufacturing Unexpectedly Contracts
Until the past few months I've not routinely reported on monthly manufacturing data, regional or otherwise. However, now that I'm tracking the Big Four economic indicators, which includes Industrial Production, I'm watching these indexes more closely. This morning we got the latest Empire State Manufacturing Survey. The diffusion index for General Business Conditions surprised to the downside, posting a contractionary reading of -1.4.
There are a variety of components to the diffusion index for those who wish to dig deeper. But at the top level, here is a snapshot of New York State's General Business Conditions. Today's decline to -1.4 from 3.1 last month and from 10 three months ago in February is an unexpected slide. The Briefing.com consensus was for a slight expansion to 3.5.
Here is a chart illustrating both the General Business Conditions and Future General Business Conditions (the outlook six months ahead):
Here is the opening paragraph from the report.
|The May 2013 Empire State Manufacturing Survey indicates that conditions for New York manufacturers declined marginally. The general business conditions index fell four points to -1.4, its first negative reading since January. The new orders index also edged into negative territory, and the shipments index fell to zero. The prices paid index declined eight points to 20.5, indicating a slowdown in selling price increases, while the prices received index was little changed at 4.6. Employment indexes were mixed, showing both a modest increase in the number of employees and a slight decline in the length of the average workweek. Indexes for the six-month outlook were generally lower, suggesting that optimism about future conditions had weakened.|
Since this survey only goes back to July of 2001, we only have one complete business cycle with which to evaluate its usefulness as an indicator for the broader economy. Since the Great Recession, the index contracted for one month in late 2010 and five months in 2011 -- the latter at a shallower level than at present.
The Empire State Survey is focused on manufacturing, so it's only a subset (albeit a very large one) of the Federal Reserve's Industrial Production Index, which covers manufacturing, mining, and electric and gas utilities. The upper left corner in the four-pack below shows a discernible and disconcerting 2012 slowdown in the rate of recovery in Industrial Production. Note that this chart illustrates the percent off the all-time high. Later this morning I will update the Big Four with the January Industrial Production data.
See also the latest ISM Manufacturing Business Activity Index.
I'll keep a close eye on some of the regional manufacturing indicators in the months ahead.