February 2016 Empire State Manufacturing Index Improved But Remains Deeply In Contraction

The Empire State Manufacturing Survey improved but continues deeply in contraction.

As this index is very noisy, it is hard to understand what these massive moves up or down mean – however this regional manufacturing survey is normally one of the more pessimistic.

Econintersect reminds you that this is a survey (a quantification of opinion). Please see caveats at the end of this post. However, sometimes it is better not to look to deeply into the details of a noisy survey as just the overview is all you need to know.

From the report:

Empire State Manufacturing Survey

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The above graphic shows that when the index is in negative territory that it is not a signal of a recession – of 8 times in negative territory (since the Great Recession) – no recession occurred. Conversely, a positive number is likely to be indicating economic expansion. Historically, when it does make a correct negative prediction it can be timely – this index was only two months late in going negative after what was eventually determined to be the start of the 2007 recession.

This survey has a lot extra bells and whistles which take attention away from the core questions: (1) are orders and (2) are unfilled orders (backlog) improving? Econintersect emphasizes these two survey points – and both improved but remain in contraction.

Respondents believe the level of unfilled orders (backlog) is has been negative since 2011. Unfilled order contraction can be a signal for a recession – and remains contraction this month.