US: Empire State Mfg Survey

Wed Nov 15 07:30:00 CST 2017

Consensus Consensus Range Actual Previous
General Business Conditions Index - Level 26.0 20.0 to 29.5 19.4 30.2

Welcome slowing is appearing in the New York manufacturing sector where November's Empire State index came in at 19.4, still unusually strong but down from October's 8-year high of 30.2. Shipments are slowing this month, down more than 9 points but still very strong at 18.4. Unfilled orders have moved into contraction at minus 4.6 while delivery times are finally shortening, at minus 2.3 following hurricane-related delays in the two prior months.

But new orders keep rolling in, up 2.7 points to a very strong 20.7 while employment, though down 4.1 points to 11.5, also remains one of the report's hot spots. Input costs remain elevated while selling prices, in a special indication of strength, continue to show traction.

Readings in this report are still unusually strong and hint at the risk of overheating, as do other regional reports which have been overstating actual strength in the sector all year. Yet manufacturing does appear to be building momentum going into year end in what will likely prove a special plus for fourth-quarter GDP. Watch tomorrow for what is expected to be a long awaited rebound in the manufacturing component of the industrial production report.

Market Consensus Before Announcement
Readings throughout the Empire State report are near or at expansion highs including the general business conditions index which is expected to come in at 26.0 in November vs October's 30.2. Shipments and employment have been showing steadily increasing strength.

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.