Then New York Fed’s Empire State Manufacturing Survey improved in March 2011, but the analysts’ eyes are eastward trying to gauge the impact of the Japanese literal business meltdown underway. This is one case that events have overrun even the forward looking surveys.
The Empire State Manufacturing Survey indicates that conditions for New York manufacturers continued to improve in March. The general business conditions index inched up 2 points, to 17.5. The new orders and shipments indexes fell but remained above zero, while the unfilled orders index rose above zero for the first time in a year. Price indexes continued to climb, suggesting that price increases had accelerated. Employment indexes were positive and above their February levels, indicating that employment had expanded. Future indexes were little changed, as respondents continued to be strongly optimistic about the six month outlook, although future price indexes were sharply higher.
It is hard to concentrate on the results of this survey when future conditions are under a pale of the events occurring in Japan. This author was involved in construction of nuclear reactors similar to the GE design used at Fukushima Daiichi nuclear complex. BWR type plants are fairly simple and slow moving, allowing many potential options IF you can get supplies and energy to the plant.
The issue is how far has the degradation gone. The plant operators and the government are very tight lipped about the conditions of the shutdown, safety systems, primary containment, and reactor pressure vessel.
The scenario unfolding was never postulated making the safe shutdown problematic. However, I also lived downwind of Chernobyl, and, based on that experience, would suggest the worst case situation is likely not as terrible as some commentators on TV are postulating.
In any event, adding radiation to the rubble is equivalent to dropping gasoline on a forest fire – making a terrible situation intolerable. The Japanese are very resilient, and the manufacturing and business recovery from the earthquake and tsunami is dependent on safe shutdown of this plant.
Back to the NY Fed survey, Econintersect looks at the unadjusted data of the survey. In this case, both the adjusted and non-adjusted data say the same thing: Conditions are improving conditions but are not yet exceeding the conditions of 1Q2010.
The key to this survey is new orders and unfilled orders which remain in a general upward trend line since late 2010. Unfilled orders confirm business is expanding. In diffusion indexes, any value above zero shows growth. Hard data has shown growth in both unfilled orders and new orders.
Normally, Econintersect warns against taking surveys too seriously. In this case, I doubt most people even looked at the survey except in passing. The question is not how much the business community will grow, but how much it will be affected by the disaster unfolding in Japan.
January Was a Good Month for Business by Steven Hansen
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Empire State Manufacturing Survey Improves – What is This Saying? by Steven Hansen