Manufacturing activity in the New York area came in significantly weaker than expected for the month of September, missing expectations for the seventh time in the last eight months. While economists were forecasting the headline reading to come in at -0.5 versus last month’s reading of -14.92, the actual reading came in at -14.67. When it comes to predicting the Empire Manufacturing report, economists may want to reassess their methods. The chart below shows the average deviation in the reported Empire Manufacturing number relative to expectations on a six-month rolling basis. When the blue line is positive, it indicates that the Empire Manufacturing report has been coming in better than expected while a negative reading indicates the report has been coming in weaker than expected. At a current level of -8.5, there has only been one other six-month stretch since 2003 where economists were missing the mark in this report by a wider margin.
The charts below show the historical readings of the Empire Manufacturing’s current conditions index as well as the outlook for the next six months. Once again this month, the current conditions index is at levels not seen since the last recession. Along with the current conditions, expectations (green line top chart) have also been fading and are now at their lowest level since January 2013. The second chart below shows the plans for Capital Expenditures and Tech Spending over the next six months. As shown, both indices declined with Technology spending just barely hanging on to positive territory.
Finally, the table below breaks down both the current conditions and the six-month outlook for each of the Empire Manufacturing report’s components. As far as current conditions go, the only two that showed improvement were New Orders and Shipments, which both remains in contraction territory. On the downside, the employment picture for manufacturers in the New York Area is not looking very good as Average Workweek and Number of Hours Worked both saw the largest declines and are both contracting. It doesn’t appear as though the employment outlook is all that great either as expectations for Average Workweek fell more than any other components.