Empire State manufacturing index falls in August
By Michele Maatouk
Date: Monday 16 Aug 2021
(Sharecast News) - Manufacturing activity in the New York area expanded more slowly in August, according to a survey released on Monday.
The New York Fed's Empire State index fell to 18.3 from July's record 23.0, making the lowest reading since March and coming in below expectations for a reading of 28.5.
Just over a third of respondents reported that conditions had improved over the month, while 16% said they had worsened.
The new orders index fell 18 points to 14.8 in August, while the shipments index slumped nearly 40 points to 4.4. The delivery times index rose to 28.3 from 20.2 in July, and the inventories gauge printed at 6.2 in August from 16.2 the month before.
Ian Shepherdson, chief economist at Pantheon Macroeconomics, said this was an inevitable correction and that the manufacturing recovery is moderating, not rolling over.
"The July surge came out of the blue and was not replicated elsewhere, so a correction in August was always likely; the only question was how far the index would drop," he said.
"In the event, the 24.7-point August plunge reversed almost all the 25.6-point July leap. The key new orders index corrected a bit more aggressively, falling to 14.8 in August, a five-month low. It's tempting to blame this softening on the surge of Covid cases caused by the Delta variant, but that's probably not the story; the Empire State index is now merely back in line with the level implied by China's Caixin PMI a couple months ago.
"Under normal conditions, the Caixin index leads both the regional and national US industrial surveys by two or three months. A further modest decline now seems likely, but the global manufacturing recovering is moderating rather than ending. Inflation pressures remain intense, though the Empire State prices paid index peaked back in May. Prices received tend to lag a bit, so we are inclined to think that the jump to 46.0 in August from 39.4 in July will mark the peak."
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