Regional Manufacturing Update:
Empire State Looking a Bit Scary
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 was not good.
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. The -10.4 was substantially below the Briefing.com consensus of -3.0, which would have been an improvement over the previous month's -5.9.
Here is the opening paragraph from the report. The one positive note was the modest improvement in future business conditions.
|The September Empire State Manufacturing Survey indicates that conditions for New York manufacturers continued to weaken. The general business conditions index slipped another five points to -10.4, its second consecutive negative reading. The new orders index fell nine points to -14.0, its third straight negative reading. Both of these measures reached their lowest levels in almost two years. The shipments index was little changed at 2.8. The prices paid index edged up to 19.2, suggesting moderate increases in input prices, while the prices received index hovered a little above zero for a fourth consecutive month. The index for number of employees fell noticeably but remained just above zero at 4.3, suggesting a slower pace of hiring activity than in recent months. The average workweek index remained near zero. By contrast, indexes for the six-month outlook were mostly steady to somewhat higher than in August, suggesting modestly greater optimism about business conditions in the months ahead.|
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 the recent dip in Industrial Production. Note that this chart illustrates the percent off the all-time high.
See also the latest ISM Manufacturing Business Activity Index, which has undergone its third month of contraction. That index, also of the diffusion variety, is also in contraction territory, although at a shallower level than the Empire State reading.
We'll keep a close eye on some of the regional manufacturing indicators in the weeks ahead.