Empire State Manufacturing Survey Crashes

Econintersect continues to look for recessionary “dead shoots” as the economy is operating with little upward dynamics.  Our recession watch remains in effect.  The NY Fed just issued a jaw dropping survey of its area manufacturers for November 2010.

The Empire State Manufacturing Survey indicates that conditions deteriorated in November for New York State manufacturers. For the first time since mid-2009, the general business conditions index fell below zero, declining 27 points to -11.1. The new orders index plummeted 37 points to -24.4, and the shipments index also fell below zero. The indexes for both prices paid and prices received declined, with the latter falling into negative territory. The index for number of employees remained above zero but was well below its October level, and the average workweek index dropped to -13.0. Future indexes generally climbed, suggesting that conditions were expected to improve in the months ahead, although the capital spending and technology spending indexes inched lower.

Just for the record, surveys are not real data – just feelings of the secretary or administrative assistant the fills out the forms so the boss can send them in to the Fed.  But despite my cynicism, I hold the highest respect for the Fed and its surveys.  History has shown that they have a higher degree of accuracy then other manufacturer’s surveys.

Econintersect has seen a glimpse of only one data point (which is in the process of being released) that is indicating a downward economic direction.  We have a month to wait to begin to see hard November data.  This survey is VERY negative.

Econintersect believes there are two very critical pieces of this survey which paint a picture of our economic direction – new orders and unfilled orders (backlog).  We have to go back to the depths of the Great Recession to get new order survey data this bad.

But it was the MoM change in new orders is the real news.  We have to go back to the decline between September and October 2001 to find the same magnitude of decline.

If backlog is increasing, the economy is definitely growing. So far the business order backlog is continuing to decline since the early stages of the Great Recession.  This months survey continued to show the contraction.