The Empire Manufacturing report for July was positive (9.46) and better than expected (5.00) for the second straight month. Unlike last month's report, which had a lot of weak undertones in it, this month's report was considerably better. As shown in the table below, just three of the nine subcomponents in today's report were below zero (Unfilled Orders, Inventories, and Average Workweek). Furthermore, the only two components that declined were Prices Paid and Prices Received. This would indicate that, in this survey at least, inflation is not an issue.
The top chart below shows the N.Y. Fed Manufacturing Index for General Business Conditions now and six months out. As shown, both indices have now been positive for the last two months. The bottom chart shows plans for Tech Spending and Capital Expenditures looking out six months from now. After plunging in June, both of these indices rebounded in July. Swings like we have seen in the last two months in the Empire Manufacturing index highlight the importance of not reading too much into one month's report, and instead focusing on the longer-term trends.