– February 18, 2020
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The latest results from the Empire State Manufacturing Survey suggest the manufacturing sector may be rebounding. The survey has two sets of questions, one set covering current conditions and one set covering future expectations. Overall, current conditions showed a significant improvement while expectations were somewhat lower but still positive.

The index for current general business conditions rose 8.1 points to 12.9 in February, the highest level since May 2019. Among the other key components for the current-conditions questions, the shipments index gained 10.3 points to 18.9, the highest level since November 2018 (see top chart). The current shipments index has a broadly similar pattern to total manufacturing production as measured by the Federal Reserve’s industrial production for manufacturing index. The sharp improvement in the New York Fed survey index is a positive sign for manufacturing output (see top chart).

The Empire State Manufacturing Survey index for new-orders index jumped 15.5 points to 22.1 in February, the highest since September 2017 (see bottom chart). This index has a broadly similar pattern to total manufacturing new orders data from the U.S. Census Bureau. The strong gain for February is another positive sign for the overall manufacturing sector (see bottom chart).

Among the other current-conditions indexes, unfilled orders, delivery times, inventories, and prices received all had gains for the month of February. Number of employees and average employee workweek both eased downward in the latest survey with number of employees falling to 6.6 from 9.0 and average employee workweek turning negative with a reading of -1.0.

For the forward-looking questions, results were generally weaker in February but most indexes remained above the neutral zero threshold. The index on general business conditions in manufacturing six months ahead fell 0.7 points to 22.9 while the expectations for new orders index fell to 27.5, the shipments index dropped to 26.5, the unfilled orders index registered a 1.5, and delivery times came in at 3.0. The one forward-looking index to show a gain was number of employees, posting a gain of 2.9 points to 15.0

The U.S. manufacturing sector has been in a severe slowdown for the past year or so. Recently, there are some early emerging signs that growth may be improving. However, erratic and unpredictable trade policy and challenges to global growth including the recent outbreak of the coronavirus keep the outlook highly uncertain.

Robert Hughes

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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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