September 2011 Empire State Survey Slides Deeper Into Negative Territory

The Empire State Manufacturing Survey in September 2011 remained in negative territory for the fourth month in a row, falling one point to -8.8.   Key elements, however, were less bad or flat.

Econintersect continues to warn readers that this is a survey (a quantification of opinion) and tends at times to correspond and and other times to conflict with the real data which will be released in the months to come. Over time, there is a general correlation with real manufacturing data – but month-to-month conflicts are frequent.

The Empire State Manufacturing Survey indicates that conditions for New York manufacturers worsened for a fourth consecutive month in September. The general business conditions index inched down one point, to -8.8.

The new orders index held steady at -8.0, while the shipments index dropped sixteen points to -12.9. The inventories index, negative for a third month in a row, fell to -12.0—a sign that inventories continued to decline.  After dropping significantly over the summer, the indexes for both prices paid and prices received climbed several points, suggesting that the pace of price increases picked up.

Employment indexes were below zero, indicating that employment levels and hours worked fell over the month. Indexes for the six-month outlook were somewhat better than last month and generally suggested that business activity was expected to improve in the months ahead, but optimism remained well below its levels of earlier this year.

The above graphic clearly shows that the index being in negative territory is not a signal of a recession:  out of 5 times in negative territory only one occurred with a recession. Of course. the jury is still out on the fifth (current) occurrence. Econintersect believes the economy is at stall speed with no growth – but no forward looking indicator is yet confirming a dance with the dark side (recession).

This survey has a lot extra bells and whistles which distort the core questions: (1) are orders and (2) are unfilled orders (backlog) improving?    Econintersect uses unadjusted data in its analysis.

This month, as Econintersect is looking for recession signs – we look to the percent of respondents who see conditions deteriorating.

Over the last three months, respondents do not see unfilled orders or new orders getting worse.  No question, the economy is close to recession’s edge, but nothing here says it is over that edge.

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