Empire State Manufacturing Improves Modestly

by: Doug Short

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.

Yesterday morning we got the latest Empire State Manufacturing Survey. The diffusion index for General Business Conditions beat expectations, posting a expansionary reading of 9.5, up from 7.8. The Investing.com forecast was for 5.0.

Here is the opening paragraph from the report.

The July 2013 Empire State Manufacturing Survey indicates that conditions for New York manufacturers continued to improve modestly. The general business conditions index rose two points to 9.5. The new orders index rose ten points to 3.8, and the shipments index climbed twenty-one points to 9.0. The prices paid index fell four points to 17.4, pointing to a slower pace of input price increases, while the prices received index fell to 1.1, suggesting that selling prices were little changed. Employment indexes were mixed, and indicated little positive momentum in the labor market. The index for number of employees inched up to 3.3, while the average workweek index remained negative at -7.6. Indexes for the six-month outlook were generally higher -- a sign that optimism about future business conditions had strengthened.

Here is a chart illustrating both the General Business Conditions and Future General Business Conditions (the outlook six months ahead):

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Click this link to access a PDF set of charts of the individual components over the past 12 months.

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. This morning I will update the Big Four with the latest Industrial Production data and Real Retail Sales (lower right chart, which requires tomorrow's release of the Consumer Price Index to calculate).

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See also the latest ISM Manufacturing Business Activity Index.

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I'll keep a close eye on some of the regional manufacturing indicators in the months ahead.