After threats of tariffs on Mexican imports sent sentiment in the Empire Manufacturing Index plunging in June, things bounced back a bit in July as the headline index moved back above zero and surpassed consensus expectations.  While economists were forecasting the headline index to rise up to 2.0 from last month’s reading of -8.6, the actual reading came in slightly stronger at 4.3.  Expectations for six-months from now improved by a smaller margin, but they also never fell as much.

While the headline index bounced back pretty significantly in July, breadth among the components wasn’t particularly strong as just four showed m/m increases compared to five declines.  On the upside, the biggest gains were in Unfilled Orders and New Orders, while the largest decline was in Number of Employees.  In terms of expectations, breadth was much stronger as the only two components showing declines were Number of Employees and Average Workweek.  Plans for both Cap-Ex and Technology Spending both increased.

As mentioned above, the Number of Employees index saw the largest decline this month and at its current level of -9.6, this component is not far from its lowest levels since the end of the last recession.  The only period we saw a weaker reading was right in the midst of the late 2015/early 2016 oil-induced slowdown.  Employment has been a bright spot for the US economy, but this data point is negative.  Going forward, it will be important to watch the other regional FOMC indices for signs of confirmation. Start a two-week free trial to Bespoke Institutional to access our Economic Indicator Database and other interactive tools.


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