May 15, 2017 Reading Time: 2 minutes

A survey of manufacturers in New York showed overall activity was about flat in May though the outlook remains quite upbeat. The index of general business conditions fell to a −1 reading in May, where 0 is neutral. That was the first reading below the neutral level since October 2016.

The new-orders index fell to −4.4 in May from 7.0 in April. The April reading was the sixth consecutive positive reading for new orders. The shipments index dropped to 10.6 from 13.7 in April. Though this index fell 3.1 points, it is still well above the neutral level, suggesting shipments rose in the month.

The employment index fell 2 points to 11.9 in May from 13.9 in April. April and May are the strongest back-to-back readings for the employment index since February and March 2015. The average workweek index fell to 7.5 in May from 8.8 in April, suggesting a slightly slower gain.

Price pressures continue to build for New York manufacturers. The prices-received index fell to just 4.5, down from 12.4 previously, while the prices-paid index came in at 20.9, down from 32.8. The decline in prices paid is somewhat-good news, but the large difference between prices paid and prices received suggests margins may be under pressure.

Though most of the indexes regarding current conditions moved closer to the neutral level, the forward-looking components suggest a more robust outlook. The outlook for general business conditions six months ahead fell just slightly to a still-strong 39.3 in May from 39.9 in April. The outlooks for new orders and shipments both remained robust as well, posting readings of 33.2 and 37.8, respectively.

Finally, the outlook for capital investment and the outlook for technology spending registered identical 13.4 readings in May. While the index for overall capital spending was down from 27.7 in the prior month, both indexes suggest capital investment is likely to rise over the next six months.

Also out today is the May survey of home builder confidence by the National Association of Home Builders. The overall confidence index rose to 70 from 68 in April on a scale of 0 to 100. Among the three components, the index for current single-family home sales rose to 76 from 74 in April while the index for single-family homes over the next six months increased to 79 from 75. The index of traffic of prospective buyers dipped just slightly to 51 from 52 in the prior month. Regionally, the West remains the strongest region, with the index increasing to 80 from 77, followed by the South (at 72, up from 70), the Midwest (at 65, down from 67), and finally the Northeast (at 50, up from 45).

Broadly favorable results from the survey of home builder confidence suggest a positive outlook for home sales and home construction over the next several months.

Robert Hughes

Bob Hughes

Robert Hughes joined AIER in 2013 following more than 25 years in economic and financial markets research on Wall Street. Bob was formerly the head of Global Equity Strategy for Brown Brothers Harriman, where he developed equity investment strategy combining top-down macro analysis with bottom-up fundamentals.

Prior to BBH, Bob was a Senior Equity Strategist for State Street Global Markets, Senior Economic Strategist with Prudential Equity Group and Senior Economist and Financial Markets Analyst for Citicorp Investment Services. Bob has a MA in economics from Fordham University and a BS in business from Lehigh University.

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