Empire State Manufacturing Survey: Index Falls Again in May, Worse Than Forecast

This morning we got the latest Empire State Manufacturing Survey, which leveled off. The diffusion index for General Business Conditions at -1.0 was a decrease of 6.2 from the previous month's 5.2.

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.

Business activity leveled off in New York State, according to firms responding to the May 2017 Empire State Manufacturing Survey. The headline general business conditions index fell six points to -1.0. The new orders index dropped to -4.4, suggesting a small decline in orders, and the shipments index edged down to 10.6, indicating that shipments increased at a slightly slower pace than in April. Labor market indicators pointed to a modest increase in both employment and hours worked, and input prices and selling prices rose at a more moderate pace. Indexes assessing the six-month outlook were close to last month’s levels, and continued to convey a high degree of optimism about future conditions. [source]

Here is a chart of the current conditions and its 3-month moving average, which helps clarify the trend for this extremely volatile indicator:

Empire State Manufacturing

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. 2015 saw a gradual decline that picked up in 2016.

Here is an overlay of the current and future conditions (a six-month outlook). The future conditions index is still optimistic after the January Presidential election.

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

ISM Manufacturing PMI