NY Manufacturing Expands Less Than Expected, Price Pressures Non-Existent
Courtesy of Rom Badilla, Bondsquawk.com
Manufacturing activity in the New York region expanded less than market forecasts despite rebounding slightly from the previous month. Today, the New York Federal Reserve Bank released its Empire Manufacturing Index, which is a regional conditions gauge and reflects current and potentially future business activity. The Index increased to an index reading of 7.10 in August from a prior period reading of 5.08, which was a dip from earlier this year when the index reached a 2010 high of 31.86 in April. An Empire Manufacturing Index reading above zero represents economic expansion. Despite the slight rebound, today’s figure disappointed market participants as economists expected the index to come in at 8.0. The Index along with the Philly Fed survey, which is due for release on Thursday, is a leading indicator of the national manufacturing gauge, released by the Institute for Supply Management.
Looking beyond the headlines, the components reveal further deterioration of business activity. The New Orders for August fell to a contractionary negative reading of 2.71 from a positive level of 10.13 in the July. Inventories declined from 6.35 to 2.86 while Shipments collapsed to a negative reading of 11.50 from a positive 6.31 in July. On a more half-full side of things, the Number of Employees component increased from 7.94 to 14.29 in August signaling slightly better hiring conditions.
The Prices Paid component, which provides insight on inflation expectations (see chart) and a component that we have been monitoring in recent months, continues to decline signaling easing price pressures. Prices Paid fell more than five points from July’s reading to 20.0, which suggests that input prices continue to show signs of slowing. This marks the third straight decline after peaking in May when the Prices Paid index reached a strong reading of 44.74. Prices Received component, which reflects lower selling prices, mires in negative territory at 2.86 from a contractionary reading of 1.59 in July.
NY and Philly Fed Prices Paid Indices & Inflation Expectations – Past 5 Years
Finally, the National Association of Home Builders survey index declined suggesting continuing pressures on the depressed housing market. The NAHB market index, which is a survey that includes responses by over four hundred homebuilders, fell to a reading of 13 in August from 14 set in the previous month. Economists failed to forecast today’s drop, which is the lowest reading since March 2009, as Bloomberg consensus surveys expected a reading of 15. Behind the numbers, the components for current and future sales dropped. The Present Single Family Sales Index declined by a point from the previous month to an August reading of 14. Similarly, the Future Sales index fell three points to a level of 18 in August. Comparatively, the Future Sales Index reached a recent high of 27 in May and the six-month average stands at 23.
