US: Empire State Mfg Survey

Tue Jan 16 07:30:00 CST 2018

Consensus Consensus Range Actual Previous Revised
General Business Conditions Index - Level 19.0 15.0 to 21.0 17.7 18.0 19.6

Activity remains strong this month in the New York manufacturing region but did slow slightly compared to December, to 17.7 for January's general business conditions index vs an upwardly revised 19.6 in December.

New orders did slow more than 7 points but remain very solid at 11.9 while unfilled orders are back into positive ground at 4.3 from minus 8.7. Shipments, at 14.4, slowed by more than 9 points though inventories rose noticeably, up more than 12 points to 13.8. Employment slowed very sharply, down more than 19 points to 3.8 from a sharply upward revised 22.9 in December. The initial employment reading for December was 5.1 with the change reflecting year-end updates to seasonal adjustments.

The 6-month outlook among the sample remains very strong, at 48.6 for a 2.3 point gain with the outlook for new orders up more than 5 points to 47.6. Price data show acceleration for inputs, up nearly 7 points to a very elevated 36.2 with selling prices likewise showing traction, up more than 10 points to 21.7.

Employment is a soft spot in January's report but strength is evident in unfilled orders and especially prices. This is the first indication on 2018's factory sector and, like last year's very strong run for the regional samples, conditions and optimism among these samples remain very strong.

Market Consensus Before Announcement
Forecasters are looking for continued strength in the January's Empire State index, at a consensus 19.0 vs December's 18.0. But there was a slight hint of weakness in the December report as unfilled orders contracted for a second month and hiring slowed noticeably. Six-month expectations for new orders were also down. Yet in general this report has been very strong for the last year and, as the first regional report to be released each month, has consistently and accurately telegraphed strength in subsequent reports including the Philly Fed and the Dallas Fed.

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.