The Empire State Manufacturing Survey index declined but remains in expansion. The key internals likewise declined but remains in expansion.

Analyst Opinion of Empire State Manufacturing Survey

I am not a fan of surveys - and this survey jumps around erratically - but has been relatively steady for the last year. This report was weaker than last month.

• Expectations from Nasdaq/Econoday were for a reading between 20.0 to 25.0 (consensus 23.0) versus the 19.0 reported. Any value above zero shows expansion for the New York area manufacturers.
• New orders subindex of the Empire State Manufacturing declined but remains in expansion, whilst the unfilled orders sub-index improved and remains in expansion...
• This noisy index has moved from 24.4 (September 2017), 30.2 (October), 19.4 (November), 18.0 (December), 17.7 (January 2018), 13.1 (February), 22.5 (March), 15.8 (April), 20.1 (May), 25.0 (June), 22.6 (July), 25.6 (August) - and now 19.0.

As this index is very noisy, it is hard to understand what these massive moves up or down mean.

Econintersect reminds you that this is a survey (a quantification of opinion). Please see caveats at the end of this post. However, sometimes it is better not to look too deeply into the details of a noisy survey as just the overview is all you need to know.

From the report:

Empire State Manufacturing Survey

The above graphic shows that when the index is in negative territory that it is not a signal of a recession - of 10 times in negative territory (since the Great Recession) - no recession occurred. Conversely, a positive number is likely to be indicating economic expansion. Historically, when it does make a correct negative prediction it can be timely - this index was only two months late in going negative after what was eventually determined to be the start of the 2007 recession.

This survey has a lot of extra bells and whistles which take attention away from the core questions: (1) are orders and (2) are unfilled orders (backlog) improving? - and the answer is that both declined but remain in expansion.

Unfilled order contraction can be a signal for a recession.

Summary of all Federal Reserve Districts Manufacturing:

Richmond Fed (hyperlink to reports):

Kansas Fed (hyperlink to reports):

Dallas Fed (hyperlink to reports):

Philly Fed (hyperlink to reports):

New York Fed (hyperlink to reports):

Federal Reserve Industrial Production - Actual Data (hyperlink to report):

Holding this and other survey's Econintersect follows accountable for their predictions, the following graph compares the hard data from Industrial Products manufacturing subindex (dark blue bar) and US Census manufacturing shipments (lighter blue bar) to the Dallas Fed survey (light blue bar).

In the above graphic, hard data is the long bars, and surveys are the short bars. The arrows on the left side are the key to growth or contraction.

Caveats on the use of Empire State Manufacturing Survey:

This is a survey, a quantification of opinion - not facts and data. Surveys lead hard data by weeks to months and can provide early insight into changing conditions. Econintersect finds they do not necessarily end up being consistent compared to hard economic data that comes later, and can miss economic turning points.

According to Nasdaq / Econoday:

The New York Fed conducts this monthly survey of manufacturers in New York State. Participants from across the state represent a variety of industries. On the first of each month, the same pool of roughly 175 manufacturing executives (usually the CEO or the president) is sent a questionnaire to report the change in an assortment of indicators from the previous month. Respondents also give their views about the likely direction of these same indicators six months ahead.

This Empire State Survey is very noisy - and has shown recessionary conditions throughout the second half of 2011 - and no recession resulted. Overall, since the end of the 2007 recession - this index has indicated two false recession warnings.

No survey is accurate in projecting employment - and the Empire State Manufacturing Survey is no exception. Although there are some general correlation in trends, month-to-month movements have not correlated with the BLS Service Sector Employment data.

Over time, there is a general correlation with real manufacturing data - but month-to-month conflicts are frequent.