The Empire State Manufacturing Survey (a diffusion index) hit a multiyear high last month, then promptly crashed this month.

Diffusion Index Problems

The first problem with diffusion indices is they do not distinguish between big companies and small companies.

The second problem is they record expansion or contraction in companies surveyed, but all expansions (and all contractions) are treated equally. Barely growing and wild growth are treated alike.

Nonetheless, let’s take a peek inside the survey.

Survey Details

  • General business conditions (the overall index) fell twenty-one points to 6.2
  • New orders dropped nineteen points to -1.7
  • Shipments fell twenty-six points to 1.1
  • Unfilled orders rose 6 points but remains in negative territory at -4.55
  • Employment rose seven points to 10.2
  • The average workweek fell 4 points to -1.11
  • Prices paid fell thirteen points to 11.4, its lowest level in more than two years
  • Prices received fell eleven points to 6.8
  • Inventories rose 10 points to 2.27

General Business Conditions

Future Expectations Remain in Stratosphere

Curiously, and in spite of this month’s swan dive, the index for future general business conditions remains in the stratosphere.

Future Index Components

  • Future general business conditions is a lofty 41.7 (down 5 points).
  • The future new orders index fell three points to 42.3
  • The future shipments index declined five points to 42.5.
  • The capital expenditures index climbed nine points to 21.6, its highest level in several months
  • The technology spending index rose to 15.9. 

Are future expectations too lofty? I think so. Everyone is a believer at the top.

Mike “Mish” Shedlock