Empire Manufacturing Misses, Prints At 11.92 On Expectations Of 12.50, Prior Revised From 10.57 To 9.89
US Empire Manufacturing (Jan) M/M 11.92 vs. Exp. 12.50 (Previous number getting the traditional BLS treatment and being revised from 10.57 to 9.89 to make the number a beat). Important Empire index components: Employment: 8.4 vs. Prev. -3.4; an improvement in New Orders: 12.4 vs. Prev. 2.6; and the most critical and inflationary one: Prices Paid: 35.79 vs. Prev. 28.40. Also no surprise: inventories, that good old stand by jumps from -15.91 to 4.21. From the release: "the most widely cited factor restraining hiring plans was low expected sales growth (31 percent)."
From the release:
The Empire State Manufacturing Survey indicates that conditions for New York manufacturers improved in January. The general business conditions index rose 2 points to 11.9. The new orders index moved up 10 points to 12.4, and the shipments index surged 18 points to 25.4. After a sharp decline last month, the inventories index rose above zero. Employment indexes also climbed into positive territory. Both the prices paid and prices received indexes rose, pointing to an acceleration in both input prices and selling prices. Future indexes conveyed a high level of optimism, with the future general business conditions index advancing to a level not seen since early 2010, while future price indexes climbed to multiyear highs.
In a series of supplementary questions, respondents were asked about expected changes in the size of their firms’ workforces and about the reasons for the changes. Slightly more than half of respondents indicated that they expected their workforce to increase in the year ahead, while just 15 percent predicted declines in the total number of workers. In last February’s survey—when a similar question was asked—an even larger majority, 64 percent, predicted increases. The current results were slightly more positive for larger establishments (150 or more employees) than for smaller establishments. When those respondents intending to increase employment were asked to identify key factors underlying their plans, the vast majority (77 percent) ranked high expected sales growth as the most important. Conversely, the most widely cited factor restraining hiring plans was low expected sales growth (31 percent).
Both prices paid and prices received indexes were positive and markedly higher this month. The prices paid index rose 7 points to 35.8, its highest level in several months, with 41 percent reporting increased input prices. The prices received index advanced 12 points to 15.8, its highest level since late 2008; 20 percent of respondents boosted selling prices in January, up from 10 percent in December. Employment indexes climbed above zero, suggesting that employment increased this month after declining last month. The index for number of employees moved up 12 points to 8.4, while the average workweek index rose 17 points, to 2.1.
And lo and behold, the hopium consumption is at an all time high:
Very Favorable Outlook for the Months Ahead
Future indexes were at relatively high levels, suggesting that manufacturers widely expected conditions to continue improving over the next six months. The future general business conditions index rose 10 points to 59.0, with 61 percent of respondents expecting conditions to be better in six months. The future new orders and shipments indexes remained at similarly high levels. The future inventories index rose 16 points to 14.7, a record high, indicating that inventory levels were expected to increase in the near future as business activity improved. Future price indexes, already elevated, inched higher—a sign that respondents expected both input prices and selling prices to accelerate. Future employment indexes, though slightly lower, were positive, indicating that employment levels were expected to continue increasing. The capital expenditures index moved up significantly, to 34.7, and the technology spending index edged up to 22.1.
Elsewhere, the spin from Goldman is beyond painful...
BOTTOM LINE: Empire index starts 2011 with a bang, as modest increase in headline index masks much larger gains in orders, shipments, and employment. December revised down due to seasonal recalculation.
Empire index +2 (2, +1), with +1 judgmental adjustment for composition of answers to specific aspects of business.
Empire index +2.03 points to 11.92 in Jan vs. median forecast +12.5.
1. The Empire index rose 2.03 (hey, let's call it 2) points in January from a level that was revised down by about 0.6 points due to the annual recalculation of seasonal factors. This increase is actually a bit larger than the median forecast just ahead of the report-an expected increase of 1.93 points to +12.5. At 11.92 in January, the index continues to point to firm growth in manufacturing. [ZH: additionally, if December had been revised to -999,999,999 this would have been the greatest beat in the history of the universe]
2. Responses to questions about specific aspects of business in December were much stronger than suggested by the 2-point headline increase. For example, the index for new orders advanced 10.4 points to +12.4 while the shipments index surged more than 18 points to +25.4. The employment index also rose, to +8.4 from -3.4. The only index suggesting vulnerability was 20-point swing in the inventories index. On the basis of this much-firmer-than-headline gain in key subindexes, we have added a +1 judgmental adjustment to the US-MAP reading. [ZH: and this is how a consensus miss becomes a +1 event per Goldman. Sigh]
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