Key Elements of Empire State Manufacturing Survey Remain Unchanged In September 2011

The Empire State Manufacturing Survey in October 2011 remained in negative territory for the fifth month in a row, little changed at -8.5. Key elements, however, literally unchanged from a year ago.

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 continued to deteriorate in October. The general business conditions index remained negative and, at -8.5, was little changed. The new orders index hovered around zero, indicating that orders were flat, while the shipments index rose above zero to 5.3.

The inventories index stayed below zero, a sign that inventories declined. The indexes for both prices paid and prices received fell, but remained positive, suggesting that price increases moderated. The index for number of employees rose several points but was at a relatively low level of 3.4, while the average workweek index was negative for a fifth consecutive month.

The future general business conditions index dropped six points to 6.7, its lowest level since early 2009, while future indexes for prices paid and prices received declined.

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 even remains 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.  Year-over-year changes are shown below:

As you can tell, there has been significant volatility in the new order index – yet both new orders and backlog are approximately at the same levels as one year ago today.  If the USA was not in a recession one year ago, it follows that it is unlikely the USA is in a recession today using this index as a guide.

However, 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.

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