Empire State manufacturing index at worst level in more than a year
By Michele Maatouk
Date: Tuesday 15 Jan 2019
(Sharecast News) - Business conditions in the New York region deteriorated much more than expected in January, according to a survey from the New York Fed, as the US-China trade war and the government shutdown took their toll.
The Empire State manufacturing index slumped to 3.90 from 10.90 in December, missing expectations for a reading of 10.75 and hitting its lowest level in well over a year.
The new orders index slid to 3.5 from 13.4 in December, while the shipments index fell to 17.9 from 20.3 and the delivery time gauge printed at -2.1 this month compared to 3.2 in December.
Meanwhile, the index for future business conditions fell 13 points to 17.8.
Ian Shepherdson, chief US economist at Pantheon Macroeconomics, said the consensus forecast always looked wildly optimistic given the plunge in the ISM manufacturing index and the weakening in global manufacturing PMIs.
"This reading is unlikely to mark the floor; we expect the Empire State to drop to about -10 over the next couple of months, marking the lowest point since early 2016, when manufacturing was hit hard by the collapse in capex in the oil sector. The current weakening is different; the trade war with China, coupled with the underlying slowing in China's growth, likely is responsible for most of the damage.
"The details show that orders are still rising, but the index fell to 3.5 from 13.4, hitting a 20-month low. The declines in shipments an employment were smaller, however, and the workweek was little changed. Inventories dropped by a hefty 14.7 points to -7.6, a 25-month low; so much for the theory that firms would build inventory ahead of feared further increases in tariffs, though these data are very volatile. Overall, the message is that manufacturing activity is still rising, but only just, and we expect a substantial further weakening over the next few months."
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