Empire State Manufacturing Survey: Activity Steadied In May

This morning we got the latest Empire State Manufacturing Survey. The diffusion index for General Business Conditions at -0.2 was an increase of 48.3 from the previous month's -48.5. The Investing.com forecast was for a reading of -27.5.

The Empire State Manufacturing Index rates the relative level of general business conditions in New York state. A level above 0.0 indicates improving conditions, below indicates worsening conditions. The reading is compiled from a survey of about 200 manufacturers in New York state.

Here is the opening paragraph from the report.

Business activity steadied in New York State, according to firms responding to the June 2020 Empire State Manufacturing Survey. After breaching record lows in April and May, the headline general business conditions index climbed forty-eight points to -0.2. New orders were unchanged from last month, and shipments inched higher. Delivery times and inventories were little changed. Employment levels edged slightly lower and the average workweek continued to decline. Input price increases picked up, and selling prices stabilized. Firms were notably more optimistic that conditions would be better in six months, with the index for future business conditions rising to its highest level in more than a decade. [full report]

Here is a chart of the current conditions and its 3-month moving average, which helps clarify the trend for this extremely volatile indicator:

Click this link to access a PDF set of charts of the individual components over the past 12 months.

Since this survey only goes back to July of 2001, we only have one complete business cycle with which to evaluate its usefulness as an indicator for the broader economy. Following the Great Recession, the index has slipped into contraction multiple times, as the general trend slowed. We saw a gradual decline in 2015 that picked up in 2016, with a giant dip in 2020 due to COVID-19.

Here is an overlay of the current and future conditions (a six-month outlook).

Meanwhile, here's another look at the latest ISM Manufacturing Business Activity Index.

Let's compare all five Regional Manufacturing indicators. Here is a three-month moving average overlay of each since 2001 (for those with data).

Here is the same chart including the average of the five. Readers will notice the range in expansion and contraction between all regions.