December 2015 Empire State Manufacturing Index Continues In Contraction

The Empire State Manufacturing Survey improved but remains in contraction.

Expectations were for a reading between -10.00 to 2.00 (consensus -7.0) versus the -4.6 reported. Any value above zero shows expansion for the New York area manufacturers.

New orders and unfilled orders sub-index of the Empire State Manufacturing Survey are in contraction but improved this month.

This noisy index has moved from -3.6 (December 2014), +10.0 (January 2015), +7.8 (February), +6.9 (March), -1.2 (April), +3.1 (May), -2.1 (June), 3.9 (July), -14.9 (August), -14.7 (September), -11.4 (October), -10.7 (November) – and now -4.6.

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

z empire1.PNG

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 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.