Empire State Manufacturing Survey Less Good in May 2011

The Empire State Manufacturing Survey’s rate of improvement slowed slightly in May 2011.

The Empire State Manufacturing Survey indicates that conditions for New York manufacturers improved in May, but at a slower pace than in April. The general business conditions index fell ten points to 11.9. The new orders index declined five points to 17.2, and the shipments index slipped three points to 25.8. The inventories index climbed to 10.8, its highest level in a year. The prices paid index rose to 69.9, its highest level since mid-2008, while the prices received index held firm at 28.0. Future indexes continued to convey a high level of optimism about the six-month outlook, although prices are widely expected to rise.

In a series of supplementary questions, firms were asked about past and expected changes in both their input prices (prices paid) and selling prices (prices received). Respondents estimated that the prices they paid rose by 8.1 percent, on average, over the past twelve months—up from 5.9 percent in last May’s survey. Looking ahead to the next twelve months, respondents on average predicted a price rise of 5.6 percent. Firms reported considerably smaller increases in prices received: the average respondent cited a 1.9 percent increase in selling prices over the past year (down from 2.9 percent in the May 2010 survey) and an expected increase of 3.6 percent for the year ahead.

Econintersect offers its usual warning about taking survey results seriously as they are not based on hard data.   This particular survey is a noisy piece of work with terrible seasonal adjustment results.  Business activity simply does not jump around this much month to month with proper seasonal adjustment methods.

This survey has a lot extra bells and whistles which distort the core questions – are orders and unfilled orders (backlog) improving?  Econintersect uses unadjusted data in its analysis.

Surveys are unsupported opinions – and likely are delegated to those who are not in a direct knowledge position.  Waking up on the wrong side of the bed is a factor.  Still, new orders seem to be in an average range for our current economy – and roughly the same as it was a year ago.

Unfilled orders are the indicator of an expanding economy.  Here you see the general upward trend – and this so far has been confirmed when the hard data is released.

The real news this month is that the uptrend on future business condition outlook is continuing.

What is not surprising this month is that business is seeing a continuing surge in prices paid.  Econintersect expects to see a moderation of price increases in the coming months if current short term price trends continue.

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