In a rare glimpse of sunlight for the recessionary US manufacturing sector, moments ago the Empire Fed Manufacturing Survey reported that contrary to expectations of another contractionary print (consensus was looking for -4.9%), General Conditions in June 2016 expanded modestly for New York manufacturers with the headline general business conditions index climbing a whopping fifteen points to 6.0, above the highest estimate of 2.0.
Unfortunately for workers, the headline did not translate into better work conditions as the number of employees index declined to 0.0, the worst print since March, while the average employee workweek remained in contraction at -5.1.
This rebound was driven by the new orders index and the shipments index which rose from negative values to 10.9 and 9.3, respectively—a sign that orders and shipments were increasing after last month’s decline. On the other hand, the inventories index fell to -15.3, indicating that inventories were lower, and the employment index also fell from 2.08 to zero, signaling that employment counts were unchanged. The prices paid index held steady at 18.4, suggesting that moderate input price increases were continuing, and the prices received index was near zero, indicating that selling prices were stable. Firms were more optimistic about the six-month outlook this month, and capital spending plans picked up.
Here is the full breakdown:
- General business conditions rose to 6.01 from -9.02 in the last month; with the forecast range from -7.50 to 2.00 based on 49 estimates
- Prices paid rose to 18.37 vs 16.67
- New orders rose to 10.9 vs -5.54
- Number of employees fell to 0 vs 2.08
- Work hours rose to -5.1 vs -8.33
- Inventory fell to -15.31 vs -7.29
- Six-month general business conditions rose to 34.84 vs 28.48
That said, keep in mind that this index has been extremely volatile in recent months, surging to 10 in April, only to tumble in May after spending most of the past 12 month in negative territory.
Among the more important data points was the six month ahead expectations, which in June saw the Number of Employees tumble from 10.42 to -2.04, the first negative print in over a year, suggesting the employment picture for mfg workers remains all too dreary.
Some more observations from the report:
Employment Remains Flat
The prices paid index was little changed at 18.4, an indication that input prices continued to increase at a moderate pace. The prices received index edged up to -1.0, suggesting that selling prices were largely stable. The employment index came in at a reading of zero, indicating that employment levels remained flat—a pattern evident since February. At -5.1, the average workweek index showed that hours worked declined this month.
Greater Optimism about the Six?Month Outlook
Indexes for the six-month outlook suggested that respondents were more sanguine about future conditions. The index for future business conditions rose six points to 34.8, reaching its highest level of 2016. Indexes for future new orders and shipments also increased, and firms expected employment levels and the average workweek to hold steady in the coming months. After a sharp decline last month, the capital expenditures index rose eight points to 11.2, and the technology spending index edged down to 4.1.
In light of recent volatility, we will need to see at least several more months of stable prints before declaring that this month’s data was anything more than just an outlier.
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