US: Empire State Mfg Survey

Fri Apr 15 07:30:00 CDT 2016

Consensus Consensus Range Actual Previous
General Business Conditions Index - Level 3.00 -0.50 to 10.00 9.56 0.62

After a deeply negative run from August to February, the Empire State report is showing real life. Today's index, which is the first factory indication on April, rose sharply to a higher-than-expected 9.56 level that is in solid expansion ground. New orders are even a bit stronger at 11.14 which follows February's 9.57. Unfilled orders are still shrinking but only just barely, at minus 0.96 which is the best reading since July. Shipments are at 10.17 for a second straight gain. And for the first time since August, employment is back over zero, at plus 1.98. Prices paid shows a sharp increase to 19.23, the result of higher petroleum prices. What's really impressive in this report is that key readings are all in solid and sustainable positive ground. This year's depreciation in the dollar is a certain plus for exports and may now be emerging as a plus in factory data. Watch for industrial production at 9:15 a.m. ET this morning for the first definitive factory indications on March.

Market Consensus Before Announcement
The Empire State report was the first of several regional reports in March to signal a rebound following a half-year of contraction. New orders showed substantial strength in the March report and they support the consensus forecast for plus 3.00 in the overall index for April. This doesn't sound like much but would be the strongest reading since March last year. The 6-month outlook was also strong in the February report, pointing to optimism that this year's dip in the dollar is certain to help exports.

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.