Empire State Manufacturing General Business Conditions Index Plunges 11 Points To 23.5 In October
Cash for Clunkers hangover is permeating everywhere, with the latest casualty being the Empire States Manufacturing Index General Business Conditions, which tumbled from 34.6 to 24.5 in October. Never one to leave on a sour note, the NY Fed's survey indicated that respondents are even more optimistic even as coincident data trends turn negative, curiously on expectations of deteriorating margins, and a hope that no additional cash will have to be spent as the "new normal" is attained.
Overall the decline was pervasive across virtually all measured verticals:
The general business conditions index remained positive for a fourth
consecutive month, although it dropped 11 points, to 23.5, from
October’s relatively strong level. Forty-three percent of respondents
indicated that conditions had improved, while 19 percent reported that
conditions had deteriorated. The new orders and shipments indexes both
posted similar declines. The new orders index fell from 30.8 to 16.7,
and the shipments index declined from 35.1 to 13.0. After turning
positive in October, the unfilled orders index drifted back below zero,
ending at -2.6. The delivery time index also fell below zero, to -2.6. The inventories index remained near last month’s level, at -17.1.
Of course, hopium is here as well, with respondents expecting nothing but central-planning mandated blue skies as the next five year plan is passed:
The six-month outlook remained optimistic, with an expectation that
business activity, inventories, and employment would rise in the months
ahead. The future general business conditions index rose to 57.0, its
highest level in several years. The future new orders index held steady
at 52.4, but the future shipments index dipped to 48.9. The future
inventories index climbed 13 points to 7.9, its first positive reading
in more than a year, suggesting that some degree of inventory
rebuilding is expected in the near future. Forward-looking price
indexes rose sharply: the index for future prices paid climbed 24
points, to 48.7, and the index for future prices received rose 17
points, to 27.6. The index for future number of employees climbed to
30.8, while the future average workweek index held steady at 18.4. The
measure for planned capital expenditures rose to 21.1, and the measure
for planned technology spending rose to 14.5.
A curious supplementary questioning survey shows that respondents anticipated improving conditions while spending little to no cash in the future. Maybe someone should explain to all these very sophisticated people what IRR, CapEx and investing in your business means.
In a series of supplementary questions (see Supplemental Reports tab),
respondents were asked about their cash holdings and debt financing.
More than 40 percent of manufacturers expected cash holdings to
increase over the next year, while 24 percent expected them to
decline—in sharp contrast to results from an identical survey conducted
a year ago, when more manufacturers had expected cash holdings to
decline than to rise. Respondents were also asked about expected
changes in their outstanding debt; in the current survey, 39 percent of
manufacturers said that they anticipated declines, while just 16
percent expected increases—again, a noteworthy change from last year’s
survey, when nearly as many respondents had anticipated increases as
decreases in debt. In response to a related question on current cash
holdings, 34 percent of firms said that they were currently holding
higher than usual (excess) cash balances, up from 20 percent in the
November 2008 survey.