New York Fed Manufacturing Surges To Highest In Three Years But Profit Margins Crushed

The August Empire State Manufacturing Index printed at a blistering 25.2, reversing last month's plunge to 9.8, smashing expectations of a 10.0 print, and the highest print since September 2014.

The surge was driven by the new orders index which rose seven points to 20.6 and the shipments index, which hit 12.4. Meanwhile, delivery times continued to lengthen suggesting growing capacity problems in the supply chain, while inventory levels declined. More good news came from labor market indicators, which pointed to an increase in employment and hours worked.

However, the biggest red flag was for corporate margins, as prices paid spiked 9.7, from 21.3 to 31.0 while prices received declined -4.8, from 11.0 to 6.2, keeping a lid on profits. The spread between the Prices Received and Prices Paid, a proxy for corporate profits, declined to the lowest in 5 years.

That above, however, did not dent firms' optimism, and after the Empire State "Hope" Index plunged last month to an 8 month low, it rebounded in August, with indexes assessing the six-month outlook suggested that firms were quite optimistic about future conditions. The index for future business conditions rose ten points to 45.2, and the index for future new orders moved up eight points to 41.3. Employment was  expected to increase modestly, though the average workweek was expected to decline slightly.

Finally, not even the traditionally optimistic outlook had anything good to say about an increase in corporate spending: the future capex index slipped to 11.6, the lowest in almost one year.