Empire State Manufacturing Survey Is Pretty Bad in June 2011

The Empire State Manufacturing Survey went into negative territory in June 2011 with a larger than normal one month swing.  Is the world coming to an end?  If it is, the world ended in July 2010 and November 2010 which had larger 1 month declines.

In both of these occasions, the index corrected back in the following month.  Remember folks, this is a survey with tries to quantify opinion – it is not based on data.  Economic studies have shown that survey’s tend to follow consensus views (eg if you are being told the economy is slowing, the survey shows the economy is slowing).

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.

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.

Look at the above graph and remember how you felt about the economy at the various points in time.  There is no question the economy is not expanding as it was months ago – but there is no indication the economy is crashing – it is still expanding.

And let me remind our readers that April 2011 was a terrible manufacturing month – but the Empire State Survey indicated things were getting better.

The issue is the weakness of the economy.  A weak economy can easily fall prey to a small shock, such as a Greek bond default which has little direct ties to the American consumer.

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