Manufacturing activity in the New York region continued to improve this month as the Empire Manufacturing report surged from 6.5 up to 18.7, which was the largest monthly increase since last June and the highest overall reading since September 2014.  Relative to expectations, this month’s report was even stronger as it was the biggest ‘beat’ since May 2014.  While the current conditions index increased this month, optimism about the future saw a bit of a dip, declining from 49.7 down to 41.7.  However, given the wide gap between the two as of January’s report (second largest in five years), some narrowing was inevitable.

Philly Fed Chart 021517

The table below breaks down the internals of this month’s Empire Manufacturing report.  With regards to current conditions, breadth this month was very solid with every category increasing.  The largest increases came from New Orders and Shipments, while Inventories, Prices Paid, and Prices Received saw the smallest increases.  While sentiment towards current conditions was strong across the board, sentiment about future conditions was not nearly as rosy.  As shown in the right hand side of the table, only New Orders, Number of Employees, and Average Workweek increased in February.  Conversely, the biggest decline in terms of expectations came in Prices Paid.  With weakness in Prices Paid and Prices Received on both a current and future basis, this should provide some comfort to investors worried about inflation.

Philly Fed Chart 021517 Table

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