US: Empire State Mfg Survey

Fri Dec 15 07:30:00 CST 2017

Consensus Consensus Range Actual Previous
General Business Conditions Index - Level 18.0 14.7 to 25.0 18.0 19.4

There's only a slight hint of slack appearing in the Empire State index which hit Econoday's consensus with a very strong 18.0 and the first indication on this month's factory conditions.

New orders remain robust at 19.5 with shipments even more robust at 22.4. But unfilled orders are in the negative column for a second month in row, at minus 8.7 following November's minus 4.6, and labor expansion is slowing, to 5.1 for a 6.4 point decline. Another hint of slowing comes from 6-month expectations for new orders which are down a sizable 12.6 points to what is still however a very solid 41.1 for this reading. Delivery times, after contracting in November, are once again lengthening while input costs and selling prices are both on the rise, all signals of possible capacity constraints and potential overheating.

Signs of easing in unfilled orders and employment aside, this report suggests that December's factory activity will be near maximum strength. Watch later this morning for the manufacturing component of the industrial production report for the first hard economic data on November's factory activity.

Market Consensus Before Announcement
Empire State slowed in November in what was a welcome result given this year's long run of unsustainable strength in this report. Yet readings were still very strong with the headline index coming in at 19.4 with December's consensus at 18.0.

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.