US: Empire State Mfg Survey

Thu Mar 15 07:30:00 CDT 2018

Consensus Consensus Range Actual Previous
General Business Conditions Index - Level 15.0 10.2 to 16.0 22.5 13.1

Empire State is back on fire, coming in at 22.5 for March vs a consensus for 15.0 and a high estimate of 16.0. Like the Philly Fed which was also released this morning, new orders and backlogs are unusually strong in this sample, at 16.8 for a 3.3 point gain and 12.7 for a respective 7.8 point gain. And like Philly Fed, employment is up, delivery times are slowing, and prices are hot. Also like Philly Fed, this sample sees their selling prices rising sharply in the months ahead.

Small sample surveys have been sending record strong signals for the past year with actual government data showing much less strength, though tomorrow's industrial production report, which is part of the actual data, is expected to move higher.

Market Consensus Before Announcement
A bit cooler than the Philly Fed, expectations are nevertheless strong for February's Empire State index where the consensus is 15.0. Increased hiring, slowing deliveries, and traction for selling prices are some of the signs of capacity stress in this report.

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.