Empire Manufacturing: A Weak Stronger Than Expected Report

by: Bespoke Investment Group

Today's New York Empire Manufacturing report for the month of June came in better than expected (7.8 vs. 0.0), but don't let the stronger than expected reading fool you. It was a rather weak report. As shown in the table to the right, most of the indicator's sub components were actually negative this month. In fact, the level for shipments (-11.8) was the lowest since April 2009! In a further sign of weakness below the surface, the 9.3 point increase in the General Business reading was larger than any other of the indicator's nine subcomponents.

The top chart below shows the historical readings of the General Business Conditions for the Empire Manufacturing Index both currently and six months out. Even as the reading for the current period increased this month, the index for expectations six months from now actually declined. The lower chart shows plans for Technology and Capital Expenditures over the next six months for manufacturers in the New York area. In June, both of these indices saw large declines. In terms of capital expenditures, this month's decline was the largest one-month drop in the history of the index dating back to 2001.