When in doubt: baffle them with an economy that is both alive and dead (as has been the case for the past 4 months). While on one hand we saw a big miss in the Empire State Manufacturing Index [3], which slid from 20.21 to 6.56, on expectations of a +18.00 print, and the lowest since November, March retail sales [4]in turn beat expectations, coming in at +0.8% on both headline and ex-autos, with the expectation for retail sales ex-autos at 0.6%, slightly less than the +1.1% retail sale change reported for February. Why are retail sales still strong? Goldman explained it earlier: "We expect that warm winter weather boosted retail sales over the last several months, but it is probably too soon to expect a negative payback in today's report, given that temperatures were still higher than normal in March (and to a greater degree than in February)." Translation: consumers use credit cards to buy things in March they would otherwise have bought in May.
As for the Empire Fed, drilling down:
- New orders 6.48 in April after 6.84 in March
- Shipments 6.41 after 18.21
- Inventories 1.2 after 0
- Number of employees 19.28 after 13.58; avg. workweek 6.02 after 18.52
From the report [3]:
The Empire State Manufacturing Survey’s headline index fell significantly in April, though it still indicated a modest increase in activity. The general business conditions index dropped fourteen points to 6.6, suggesting that while growth continued, the pace slowed over the month. The new orders index was little changed at 6.5, indicating a modest increase in orders, and the shipments index fell twelve points to 6.4, indicating a slower pace of growth for shipments. The unfilled orders index fell six points to -7.2, and the delivery time index dropped three points to 4.8. The inventories index was little changed at 1.2, suggesting that inventory levels held steady.
Prices Continue to Climb
Input price increases remained significant. After rising sharply last month, the prices paid index fell five points to 45.8. Though somewhat lower than in March, this reading was well above the index’s level in the preceding several months. Selling prices also rose noticeably, with the prices received index climbing six points to 19.3. Employment indexes were positive, but moved in opposite directions. Pointing to a healthy increase in employment levels, the index for number of employees rose six points to 19.3, its highest level in nearly a year. The average workweek index fell thirteen points to 6.0, indicating a modest increase in hours worked.
And Retail sales losing momentum - even as they beat and remain positive...
[5]
And now back to Europe.