|General Business Conditions Index - Level||5.0||0.0 to 8.0||9.95||-3.58||-1.23|
The first indication on January's manufacturing sector is positive with the Empire State index rising out of contraction to plus 9.95 vs December's slightly revised minus 1.23 (initial reading minus 3.58).
New orders show respectable strength at plus 6.09 vs a near zero reading in December while shipments rose to plus 9.95 from plus 2.25. A big positive in the report is a solid gain in employment which rose to 13.68 vs 8.33. The gain here points to confidence in Empire State's sample underscored by a more than 9 point jump in the 6-outlook to 48.35.
Other readings include modest upward pressure for both input and output prices, a welcome indication given ongoing concerns over oil-related deflation. Next reading on manufacturing will be later this morning at 10:00 a.m. ET with the Philly Fed report, a closely watched report that has been showing exceptional strength in recent months.
Market Consensus Before Announcement
The Empire State manufacturing index in December fell to minus 3.58 for the first negative reading since January last year. This compares with plus 10.16 in November and a soft plus 6.17 in October. This report had been showing very strong momentum from May to September when the index averaged 21.22. New orders, at minus 1.97 versus November's plus 9.14, were in the negative column for the second time in the last three months while unfilled orders, at a very steep negative reading of minus 23.96, were the weakest since December last year.
The New York Fed conducts this monthly survey of manufacturers in New York State. Participants from across the state represent a variety of industries. On the first of each month, the same pool of roughly 175 manufacturing executives (usually the CEO or the president) is sent a questionnaire to report the change in an assortment of indicators from the previous month. Respondents also give their views about the likely direction of these same indicators six months ahead.
Investors track economic data like the Empire State Manufacturing Survey to understand the economic backdrop for the various markets. The stock market likes to see healthy economic growth because that translates to higher corporate profits. The bond market prefers a moderate growth environment that won't generate inflationary pressures. The Empire Manufacturing Survey gives a detailed look at New York state's manufacturing sector, how busy it is and where things are headed. Since manufacturing is a major sector of the economy, this report has a big influence on the markets. Some of the Empire State Survey sub-indexes also provide insight on commodity prices and other clues on inflation. The Federal Reserve closely watches this report because when inflation signals are flashing, policymakers can reset the direction of interest rates. As a consequence, the bond market can be highly sensitive to this report. The equity market is also sensitive to this report because it is the first clue on the nation's manufacturing sector, reported in advance of the Philadelphia Fed's business outlook survey.