The Ugly NY-Area Manufacturing Report Contains Some Inner Good Looks

New york fed outlookNew York FedEmpire State Manufacturing Survey, August 2014, Expectations Six Months Ahead, Seasonally Adjusted

Outlook for New York-area business conditions climbed 18 points to 46.8, the highest level since January 2012.

The reading came even as the headline reading for the New York Fed’s Empire State Manufacturing survey for August plunged to 14.69. Consensus was for a reading of 20 versus 25.60 prior.

“Most of the indexes for the six-month outlook rebounded sharply after slipping last month, and a number of them reached multiyear highs, signaling increasingly widespread optimism about the near-term outlook,” the New York Fed said in a release. It added that, “despite the pullback in most of the survey’s indexes for current conditions, optimism about the near-term outlook grew increasingly widespread.”

At right you can see how the six-month outlook increased across the survey’s sub-indexes.

“The fall in the Empire State index, to 14.7 in August from 25.6 in July, is not a big concern for three reasons,” Capital Economics’ Paul Dales said in a note. “First, sentiment was probably hit by the weakness of stockmarkets earlier this month. The indices measuring actual activity fared better — the shipments index rose and the new orders index only fell a bit. With equity prices now rising, the headline index may recover in September. Second, the survey remains strong by recent standards. It’s consistent with manufacturing output rising at an annualised rate of close to 10%. Third, both domestic and overseas demand have stayed strong, which will support industrial activity.”

But Dales says the survey’s paltry 0.1% producer prices increase, which took the annual rate down to 1.7% from 1.9%; and core price annual rate decline to 1.6% from 1.8% signals inflation remains elusive, though this could yet prove temporary.

Meanwhile, the new orders index slipped almost five points to 14.1, and unfilled orders inched down one point to -8.0. Shipments edged up a point to 24.6 — a multiyear high. Employment declined slightly, but the index for hours worked climbed modestly.

Here’s the chart for the headline reading. You can see it’s still well off the first-six-months-of-2014 mat:

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