Manufacturing activity in the New York area improved in May, but as has been the trend of late, the pace of improvement was more tepid than expected. While economists were expecting the headline index to improve to 5.0 vs last month’s reading of -1.2, the actual reading came in at 3.1. That said, this month’s reading broke a streak of three months where the headline index declined. Although current conditions improved, expectations for the next six months actually saw a modest decline (top chart). More alarming though, is the plans for CapEx and Technology spending over the next six months. As the lower chart illustrates, both components declined in May, and in the case of tech spending, this month’s decline was the third largest on record, behind only May 2005 and November 2008.
The table below breaks out the guts of this month’s Empire Manufacturing survey and shows the one month change in each of the components as well as the difference between the current conditions index and the reading six months out. As shown, the biggest gains this month came in New Orders (+9.9) and Inventories (+5.2). On the downside, Prices Paid (-9.8) saw a huge decline followed by Delivery Times (-6.2). In terms of where the biggest disconnects are between current conditions and expectations, manufacturers are the most optimistic about New Orders and Shipments, while they see Inventories declining and little increases in the length of the average workweek.