Empire State Manufacturing Survey Drops More Than Expected in February

Andrew Klips |

General business conditions for New York factories improved slightly this month, according to the Empire State Manufacturing Survey released on Tuesday by the Federal Reserve Bank of New York.

After surging to an unrevised 12.51 in January from 2.2 in December, the index faded back to a 4.48 reading in February.  January’s level was a 20-month high for the index.  Economist expectations varied, calling for a decline to between 8.0 and 10.0.  

The survey is one of the earliest barometers to U.S. factory conditions with readings above zero indicating an improving environment, while below zero signals worsening conditions.  The last time the headline figure was in contraction territory was October (-2.2).  The index is the first of several regional reports that many traders use to forecast the heavily watched national factory survey from the Institute for Supply Management.  The ISM Manufacturing Index for February will be released on March 3.

The new orders component dropped to -0.21 from 10.98 in January, indicating that orders were flat for the month.  The shipments index declined from 15.1 in January to 2.1 in February.  The unfilled orders index held sub-zero at -6.3.  These are three key subindexes in the “noisy” survey as they answer questions about the nuts and bolts of orders coming in and going out.

Factories are looking to charge more for products as judged by the prices received index climbing 2 points to 15.0.  The prices paid index dove from 37.0 to 25.0, suggesting a slowing pace of input price increases.

Employment didn’t change much month-over-month, with the employment index slowing to 11.25 in February from 12.2 the month prior.

Despite the capital spending index plunging to a multi-year low at 2.5, businesses remained optimistic about future conditions.  The general business conditions expectations index, which measures how business see conditions in six months, gained to 38.99 from 37.51 in January.  The employee expectations index continued to rise, jumping from 9.64 in December to 20.73 in January and now to 25.0 in February.

Wall Street is mixed following the report.  The Nasdaq is up for the eighth straight day in early trading, advancing 12 points.  The S&P 500 has edged ahead by 2 points just after the opening bell.  The Dow, however, is trading in the red, down 19 points in early action.

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