Explosive Empire

Manufacturing businesses in the New York area are roaring back to life this spring. After some readings showing only modest growth at the end of 2020 and at the start of this year, the New York Fed’s monthly manufacturing survey results released this morning showed the headline index rising to 26.3 which is the strongest level since October 2017. That indicates the region’s manufacturing sector is growing at a rapidly accelerated rate. In fact, only 12.2% of businesses reported worse overall business conditions in April which is the lowest level in nearly a decade (since May of 2011).

Given the strong reading in the index of General Business Conditions, every other area of the report also showed impressive readings. For the current conditions indices, every index is in expansionary territory with higher month-over-month moves. Some of these like those for Delivery Times, Prices Received, Prices Paid, and Unfilled Orders are also at or just off record highs after massive moves higher in the past month. Expectations generally remain positive although some indices are at less extreme places within their historical ranges while three of the indices were also lower versus March.

Beginning with a look at demand and production metrics, New and Unfilled Orders both surged in April rising 17.8 and 17.2 points, respectively. For New Orders, that month over month rise stands in the top 5% of all monthly moves and brings the index to its highest level since October 2009. That compares to last month when the index was essentially in the middle of its historical range. Meanwhile, Unfilled Orders had been elevated even before this report, but with the most recent surge in New Orders, Unfilled Orders are now at the second-highest level on record behind the reading of 36.5 from September 2001 when the fulfillment of existing orders was likely impacted by the September 11th attacks.

While demand has been very strong, firms have seen no lack of trying to fulfill those orders. Inventory levels were notably higher as that index rose to 11.6 which is in the top 2% of all readings and the highest since last February. The index for Shipments rose 3.9 points to 25 which is the highest level since August 2018. While that is a historically healthy reading, given the surge in unfilled orders and inventories it does indicate that the region’s manufacturers still have plenty of product to get out the door.

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