Empire State Manufacturing Conditions Go Negative

April 15, 2015

by Doug Short

This morning we got the latest Empire State Manufacturing Survey. The diffusion index for General Business Conditions at -1.2 shows a drop from last month's 6.9, which signals a slight contraction in activity.

The Investing.com forecast was for a reading of 7.0.

The Empire State Manufacturing Index rates the relative level of general business conditions in New York state. A level above 0.0 indicates improving conditions, below indicates worsening conditions. The reading is compiled from a survey of about 200 manufacturers in New York state.

Here is the opening paragraph from the report.

The April 2015 Empire State Manufacturing Survey indicates that business activity was flat for New York manufacturers. The headline general business conditions index turned slightly negative for the first time since December, falling eight points to -1.2. The new orders index, negative for a second consecutive month, dropped four points to -6.0 — evidence that orders were declining. The shipments index climbed to 15.2, indicating that shipments expanded at a solid pace. Labor market indicators pointed to an increase in employment levels but a somewhat shorter workweek. Input price increases picked up, with the prices paid index rising seven points to 19.2, while the prices received index fell four points to 4.3. The future general business conditions index climbed for a second consecutive month, suggesting greater optimism among manufacturers than in February and March, and the capital spending and technology spending indexes also advanced.

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. Following the Great Recession, the index has slipped into contraction multiple times, as the general trend slowed. It had remained in a relatively narrow range over the past year. The latest reading is a welcome bounce from last month's mild contraction.

Meanwhile, here's another look at the latest ISM Manufacturing Business Activity Index.

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

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