Empire Manufacturing Index Misses Consensus Of 8.0, Prints At 7.1

Tyler Durden's picture

The Empire State Mfg index rose modestly from 5.08 to 7.1, yet still missed expectations of 8.0. In a nutshell, price indexes fall, the employment indexes climb, and most critically, as this is a survey after all, the degree of optimism continues to weaken.

From the release:

The Empire State Manufacturing Survey indicates that
conditions improved modestly in August for New York manufacturers. The
general business conditions index rose 2 points from its July level, to
7.1. The new orders and shipments indexes both dipped below zero for
the first time in more than a year, indicating that orders and shipments
declined on balance; the unfilled orders index was also negative. The
indexes for both prices paid and prices received inched down, while
employment indexes were positive and higher than last month. The
six-month outlook weakened; though future indexes were generally still
positive, many fell in August, with the notable exceptions of the
future employment and capital expenditures indexes, which climbed after
falling last month.

In a series of supplementary questions,
manufacturers were asked about their capital spending plans. Looking
ahead to the next six to twelve months, 37 percent of respondents
indicated that they expected to increase capital spending relative to
its level in the past six to twelve months, while just 13 percent
planned reductions. Of those predicting increased capital spending, 27
percent noted that "a considerable fraction" of the increase reflected
investment that had been postponed because of the recession; 41
percent of respondents had given this same response in a similar survey
back in January. Another 46 percent of those surveyed this month
attributed "some" of the spending increase to the recession. The most
commonly cited factors behind increased investment were high expected
growth in sales and a need to replace capital goods other than IT
(information technology) equipment. The most widely cited factors
behind steady or decreased capital investment in the current survey
were low expected sales growth, low capacity utilization, and limited
need to replace non-IT capital goods.

Growth in Business Activity Remains Modest
The general business conditions index inched
up two points in August, to 7.1. Still close to its July value, the
index reading suggested that business activity improved over the month,
but at a very modest pace. Roughly 30 percent of respondents reported
that conditions had improved, while 22 percent reported that conditions
had worsened. The new orders index fell below zero for the first time
in over a year, dropping 13 points to -2.7—an indication that, on
balance, manufacturers saw orders decline slightly. Following this same
pattern, the shipments index also moved below zero, dropping 18 points
to -11.5. Since April, this index has fallen a cumulative 44 points.
The unfilled orders index was in negative territory for a fifth
consecutive month, but inched up 6 points to -10.0. The delivery time
index rose to zero. The inventories index was positive again in August,
but fell a few points to 2.9.

Price Indexes Fall, Employment Indexes Climb
Both price indexes declined. Continuing its
downward trend for a third consecutive month, the prices paid index
fell 5 points to 20.0, suggesting that the pace of input price
increases slowed. The prices received index, at -2.9, remained negative
for a second consecutive month, a sign that selling prices were
slightly lower in August. Employment indexes were positive and higher
than in July, indicating that employment levels and the average
workweek expanded in August. The index for number of employees had
fallen in June and July, but climbed 6 points, to 14.3, this month. The
average workweek index had dipped below zero last month, but rose 17
points to 7.1.

Degree of Optimism Continues to Weaken
Future indexes were generally positive,
indicating that manufacturers expected conditions to improve in the
months ahead. Nevertheless, many indexes fell in August, a sign that the
level of optimism was slipping, as it had for the past few months. The
future general business conditions index fell 6 points to 35.7, a
reading well below the levels observed earlier this year. The future
new orders index dipped 3 points to 31.4, and the future shipments
index retreated 6 points to 25.7. The future prices paid index dropped
11 points to 30.0, while the future prices received index increased to
22.9. Future employment indexes rose: the index for expected number of
employees climbed to 20.0, and the future average workweek index
advanced to 7.1 after dipping below zero last month. Reversing two
months of decline, the capital expenditures index moved up 9 points to
22.9. The technology spending index rose to 8.6.

Full report.