The Empire State manufacturing survey is the first in the series of monthly reports from the Fed regions.

This survey picked up where it last left off, in the red, but deeper.

The Econoday Consensus Estimate for the Empire State survey was +1.00 vs. an actual reading of -6.8.

As is typically the case, economists were too optimistic. the lowest estimate for the survey was 0.00.


The first indication on October’s factory conditions is negative. The Empire State index is below zero for a third month in a row, at minus 6.80 vs similar readings in September and August. And the details are almost entirely negative with new orders at minus 5.60 for a second sub-zero score in a row. Shipments are at minus 0.60 with employment in reverse for a fourth straight month, at minus 4.70. Unfilled orders and inventories are almost always in contraction in the Empire State sample and they are again in the October report, in low double digits which is even weaker than usual.

But there are positive signs including life for prices. Input costs rose nearly 6 points to 22.60 which signals the greatest month-to-month pressure in more than 2 years, since September 2014. Pressure also appears in selling prices, which rose nearly 3 points to 4.70 for their best showing since July 2015. The 6-month outlook is also a positive, at a respectable 36.00 though down about 2 points from last month.

Positives aside, the trends in this report are pointing to continued sputtering for manufacturing, a sector that has been flat all year on weak demand for machinery and generally weak demand from overseas.

Positives Aside?

Positives? What positives?

  1. 24.5% of firms reported an increase in input prices vs. 1.9% reporting lower prices. The net effect is 22.6% of firms reporting a rise in input prices.
  2. 11.3% of firms reported they received higher prices but 6.6% reported they received lower prices. The net effect on prices received is +4.7%.
  3. The aggregate net effect is 22.6% of firms have to pay more for manufacturing goods but only 4.7% of the firms could actually raise prices.

It is beyond ludicrous to spin profit pressures and inability to hike prices as positive, but this is how Econoday spins this stuff time and time again.

With that comment out of the way let’s take a peek at the actual Empire State Manufacturing Survey to see what else we can find.

Empire State General Business Conditions


Various Condition Components


Forward-Looking Indicators


Outlook Remains Optimistic

Indexes for the six-month outlook suggested that respondents were more optimistic about future conditions than in September. The index for future business conditions increased two points to 36.0. In addition, the index for future new orders rose seven points to 39.0 and the index for future shipments jumped fifteen points to 36.5, indicating that manufacturing firms anticipated a significant increase in activity. In a sign that firms looked to expand employment in the months ahead, the index for future employment moved further into positive territory. Indexes for future prices suggested that firms expected both input prices and selling prices to increase over the next six months. The capital expenditures index rose modestly to 13.2, while the technology spending index edged back to 8.5.

Look-Ahead Nonsense


As I have pointed out before, these look-ahead numbers are a complete joke. Look-ahead numbers are totally meaningless except when sentiment hits the gutter.

When look-ahead sentiment finally goes negative, a bottom is usually close as the following detail shows.


Look-ahead sentiment bottomed in February of 2009 at -5.1. That’s when manufacturers finally threw in the towel and the recession soon ended. Six month’s later, actual, conditions were +12.8 with optimism correctly soaring. The recession was over.

We see the same thing in the other manufacturing reports.

Other than a good laugh, the only use for these look-ahead forecasts is to spot the low from a recession bottom.

Mike “Mish” Shedlock