Another Dismal Manufacturing Report
The string of dismal manufacturing reports continues unabated today, starting back at the top with the Empire State Survey, the first of Fed-sponsored regional surveys. This survey is conducted by the New York Fed.
Contraction in the Empire State region has now lasted seven months.
The Econoday Consensus Estimate was -10. The survey came in at -16.64, below any economist’s guess.
For the seventh straight month, the Empire State report is signaling significant contraction for the manufacturing sector. The general business conditions index for February came in below low-end expectations, at minus 16.64 vs even deeper contraction of minus 19.37 in January. New orders, at minus 11.63, are in contraction for a ninth month in a row while employment, though improving to minus 0.99 from minus 13.00, is in contraction for an eighth month in a row.
Shipments are in contraction at minus 11.56 with unfilled orders at minus 6.93. The workweek is at minus 5.94. One reading in the plus column is the six-month outlook, up nearly 5 points to 14.48 which, however, is unusually low for this reading which usually tracks in the 30s and 40s. Price data show marginal improvement for inputs but contraction for finished goods.
This report is showing its weakest run by far of the recovery and, unfortunately, points to extended weakness for the nation’s factory which is getting hit by weak exports and weak energy markets at home.
Empire State Survey vs. Philly Fed Survey
The Empire State and Philly Fed surveys typically go hand-in-hand. Expect another weak report from the Philadelphia Fed region.
Econoday noted an improvement in Empire State expectations six months down the road. However, the idea that future expectations matter has long been trashed.
Manufacturers have expected improvements for years on end. Only when manufacturers throw in the towel and expect things to get worse, do things typically get better. Rising expectations in a declining market is not a good thing.
Mike “Mish” Shedlock