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US: Empire State Manufacturing Index
| Consensus | Consensus Range | Actual | Previous | |
| Index | 3.9 | -5.0 to 5.0 | -0.2 | 7.1 |
Highlights
The New York Fed's Empire State manufacturing survey for March shows a decline in the general business conditions index despite some increase in the pace of new orders. Manufacturers' perceptions of current conditions likely is a response to the lengthening war on Iran which is keeping oil prices higher and increasing uncertainty in the economic outlook.
The general business conditions index is minus 0.2 in March after 7.1 in February. The March reading is below the consensus of 3.9 in the Econoday survey of forecasters. The March number suggests the regional factory sector is neither growing nor contracting meaningfully. The index for future business conditions moderates to 31.0 in March after 34.7 in February. This continues to anticipate solid expansion about six months from now, albeit at a somewhat slower pace than in the prior three months.
The index for new orders is up to 6.4 in March from 5.8 in February and the index for unfilled orders is up to 10.8 after 9.1 in the prior month. New orders are coming in more quickly and at a pace that is building a backlog to support continued activity in the coming months. The shipments index slips to minus 6.9 in March after minus 1.0 in February. This may be in part a weather effect where winter storms interfere with transportation.
The delivery times index is up to 13.7 in March after 4.0 in February and may also be weather related as it is taking goods longer to move through the supply chain. The inventories index is essentially unchanged at 6.9 in March after 7.1 in February and points to modest inventory growth.
The employment index is up to 5.8 in March after 4.0 in February. Manufacturers are taking on new hires where qualified workers can be found. The index for the average workweeks is little changed at 1.9 in March after 2.1 in February. With new workers coming in, factories are not adding hours to meet orders.
The index for prices paid is down to 36.6 after 49.1 in February and 42.8 in January. It would appear that the increase in oil prices in February is a one-off in the trend lower for input costs. The index for prices received is 21.4 in March after 22.2 in February and 14.4 in January. The region's manufacturers are passing on some higher costs.
Market Consensus Before Announcement
The consensus sees the index at 3.9 for March versus 7.1 in February, suggesting slower growth.
Definition
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 200 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.
Description
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.
