Empire State Manufacturing Survey Up and Noisy

The New York Fed’s Empire State Manufacturing Survey is a noisy piece of work.  Sometimes up, sometimes down – but usually out of step.  Survey’s are the lowest and most unreliable source of data for investors. 

Surveys are meant to provide a peak into the manufacturing world for insight before the real data is available.  For January 2011, this survey is up with the following headline:

The Empire State Manufacturing Survey indicates that conditions for New York manufacturers improved in January. The general business conditions index rose 2 points to 11.9. The new orders index moved up 10 points to 12.4, and the shipments index surged 18 points to 25.4. After a sharp decline last month, the inventories index rose above zero. Employment indexes also climbed into positive territory. Both the prices paid and prices received indexes rose, pointing to an acceleration in both input prices and selling prices. Future indexes conveyed a high level of optimism, with the future general business conditions index advancing to a level not seen since early 2010, while future price indexes climbed to multiyear highs.

Again, 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 prefers to isolate new orders and backlog opinion results as the two primary metrics to judge the economy.  We ignore the seasonally adjustments of the opinion – and use the raw data.  Survey results are seasonally adjusted anyway in the minds of the respondents.

Backlog has been growing in the hard data so it is easy to believe the survey is likely correct.  The unadjusted new orders dropped a little, but not much for a very noisy survey.

Overall the NY Fed Empire State Manufacturing Survey does not correlate well with Industrial Production.  Use the data from all surveys at your own risk.

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