The Empire State Manufacturing Survey in November 2011 climbed out of negative territory to a value of 0.6. This ended a five month streak of negative readings which last month saw a value of -8.5. In spite of the overall improvement, key elements of the survey were unchanged.
Econintersect continues to warn readers that this is a survey (a quantification of opinion). Please see caveats at the end of this post.
The Empire State Manufacturing Survey indicates that conditions for New York manufacturers held steady in November. After a string of five consecutive months of negative readings, the general business conditions index rose nine points, to 0.6.
While the new orders index edged down to -2.1, indicating that orders were a little lower, the shipments index rose to 9.4, indicating an increase in shipments. The inventories index fell to -12.2—a sign that inventory levels dropped. The prices paid index continued to move downward, reaching 18.3, its lowest level in nearly two years; the decline suggested that the pace of input price increases slowed further in November.
The prices received index rose slightly, to 6.1, evidence that selling prices continued to increase. Employment indexes were mixed: employment levels were slightly lower and the average workweek slightly longer. Future indexes surged, indicating a widespread expectation that conditions would improve in the months ahead, with the future general business conditions index rising to its highest level since May.
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. It now has climbed well above the lowest level of last year.
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 emphasizes these two survey points and uses unadjusted data in its analysis.
Even though the overall survey improved – respondents who believe new orders and unfilled orders have improved remains in the same range it entered in mid-2011. It begs the question of what really improved in November.
This is a survey – and I would not bank on any of its results. It is something like an unsigned check – maybe you’ll get the signature and maybe you won’t.
Caveats on the use of Empire State Manufacturing Survey:
This is a survey, a quantification of opinion rather than facts and data. Opinion surveys are useful for general impressions but Econintersect finds they do not end up being consistent compared to hard economic data that comes later, and usually miss economic turning points.
This Empire State Survey is very noisy – and currently shows recessionary conditions. And it is understood from 3Q2011 GDP that the economy was expanding.
No survey is accurate in projecting employment – and the Empire State Manufacturing Survey is no exception. Although there are some general correlation in trends, month-to-month movements have not correlated with the BLS Service Sector Employment data.
Over time, there is a general correlation with real manufacturing data – but month-to-month conflicts are frequent. At the current time this survey is trending negative while Industrial Production is trending up.