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Empire State Manufacturing Disappoints

  • Written by Syndicated Publisher No Comments Comments
    December 17, 2013

    This morning we got the latest Empire State Manufacturing Survey. The diffusion index for General Business Conditions disappointed expectations, posting a reading of 0.98, up from -2.21 last month, but below expectations. TheInvesting.com forecast was for 4.75. As Investing.com points out, “The Empire State Manufacturing Index rates the relative level of general business conditions New York state. A level above 0.0 indicates improving conditions, below indicates worsening conditions. The reading is compiled from a survey of about 200 manufacturers in New York state.”

    Here is the opening paragraph from the report.

     

     

    The December 2013 Empire State Manufacturing Survey indicates that manufacturing conditions were flat for New York manufacturers. The general business conditions index rose three points but, at 1.0, indicated that activity changed little over the month. The new orders index inched up, but remained negative at -3.5, while the shipments index rose to 7.7. The unfilled orders index fell to -24.1, and the inventories index declined twenty points to -21.7; both indexes reached their lowest levels since 2009. The prices paid index was little changed at 15.7, and the prices received index climbed to 3.6. Labor market conditions remained weak, with the index for number of employees holding at 0.0 for a second month in a row and the average workweek index dropping six points to -10.8. Indexes for the six-month outlook generally conveyed a fair degree of optimism about future conditions, though to a lesser extent than in the November survey.

     

    In response to a supplementary question about problem issues, “As in earlier surveys, the issue cited most frequently, by far, as a major problem was the cost of employee benefits. Moreover, fully 80 percent of respondents expected that this would become even more of a problem a year from now.” In contrast, credit was seen as a minor problem that would become even less consequential over the next year.

    Here is a chart illustrating both the General Business Conditions and Future General Business Conditions (the outlook six months ahead):

     

     

    Click this link to access a PDF set of charts of the individual components over the past 12 months.

    Since this survey only goes back to July of 2001, we only have one complete business cycle with which to evaluate its usefulness as an indicator for the broader economy. Following the Great Recession, the index has slipped into contraction five times, the most recent being the latest data point. However the expansionary interim highs since the post-recession peak in October 2009 have gotten successively smaller, which is indicative of a generally slowing regional economy.

    Meanwhile, here’s another look at the latest ISM Manufacturing Business Activity Index.

     

     

    I’ll keep a close eye on some of the regional manufacturing indicators in the months ahead.

    Images: Flickr (licence attribution)

    About The Author

    My original dshort.com website was launched in February 2005 using a domain name based on my real name, Doug Short. I’m a formerly retired first wave boomer with a Ph.D. in English from Duke. Now my website has been acquired byAdvisor Perspectives, where I have been appointed the Vice President of Research.

    My first career was a faculty position at North Carolina State University, where I achieved the rank of Full Professor in 1983. During the early ’80s I got hooked on academic uses of microcomputers for research and instruction. In 1983, I co-directed the Sixth International Conference on Computers and the Humanities. An IBM executive who attended the conference made me a job offer I couldn’t refuse.

    Thus began my new career as a Higher Education Consultant for IBM — an ambassador for Information Technology to major universities around the country. After 12 years with Big Blue, I grew tired of the constant travel and left for a series of IT management positions in the Research Triangle area of North Carolina. I concluded my IT career managing the group responsible for email and research databases at GlaxoSmithKline until my retirement in 2006.

    Contrary to what many visitors assume based on my last name, I’m not a bearish short seller. It’s true that some of my content has been a bit pessimistic in recent years. But I believe this is a result of economic realities and not a personal bias. For the record, my efforts to educate others about bear markets date from November 2007, as this Motley Fool article attests.
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