Solid describes June's Empire State report that shows steady and firm month-to-month acceleration in orders and shipments. New orders rose more than three points to 17.53 to indicate significant month-to-month growth in this most important of all readings. Shipments, which follow orders, rose nearly 8-1/2 points to 19.67 with the workweek rising to 8.64 vs. no change in May. Delivery times slowed significantly in the month, to 9.88 vs. May's minus 6.58 to indicate stress on the supply chain. Manufacturers in the region are adding employees but at an index of 12.35 they are adding fewer employees than in May or April when the index came in just over 20. The headline business conditions index, steady at 19.57, reflects the the overall strength underway.
Price acceleration eased reflecting lower energy prices as prices paid fell back more than 17 points to 27.16. Pass-through of costs is minimal with the prices received index steady at 4.94. Inventories remain a key negative in the report, at minus 1.23 to indicate a marginal draw this month as businesses continue to keep a tight grip on costs. Like inventories, unfilled orders are also a negative at the same minus 1.23 reading to indicate a slight month-to-month draw. Employment and inventories really won't get going until backlogs begin to build.
Despite the negatives, today's report is a plus for the manufacturing outlook pointing to strength for Thursday's report from the Philadelphia Fed and for the monthly ISM purchasing report to be posted at the beginning of next month.
Market Consensus Before Announcement The Empire State manufacturing index for May came in at 19.11, well above the break-even mark of zero to signal significant growth compared to April. However, the May number was notably below April's 31.86, indicating moderation in growth. June may also show moderation as May's new orders index came in at 14.3-down from April's 29.49.
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. Why Investors Care
The Empire State Manufacturing Survey has a much shorter history than the Philadelphia Fed's business outlook survey. The two series tend to move in tandem much of the time, although not each and every month. They are both considered leading indicators for the ISM manufacturing survey.