Empire Manufacturing Comes Up Short Again

by: Bespoke Investment Group

After two straight months of weaker than expected reports, Empire Manufacturing made it three in a row Monday morning, and did it in style. While economists were forecasting a reading of 12.4, which would have been a slight improvement from the November reading, the actual reading came in at -3.6. That 16 point spread was the biggest miss since June 2011, and the eighth weakest report relative to expectations going all the way back to 2002.The table below breaks out this month's Empire Manufacturing report by each of its individual components. As the internals of the report indicate, there was widespread weakness in December. Of the nine subcomponents, six were negative, and all but one components (Prices Received) showed a decline. The biggest declines came in Unfilled Orders (16.5), Shipments (-12.1), Inventories (-11.5), and New Orders (-11.1).

What is interesting to note about the chart and table above, is how large the gaps are between current conditions and expectations six months out. For General Business conditions, the gap currently sits at 42.2 points. This gap is the widest since May 2011, and indicates that manufacturers expect the current weakness to be temporary. Nowhere was the divergence between current conditions and expectations six months from now more evident was in the Average Workweek. In this month's report, the current level for the Average Workweek index was -11.46, which was the lowest reading since July 2011. Meanwhile, the Average Workweek Expectations index rose to 12.5, which was the highest reading since March 2012. Hopefully, this optimism pans out!