May Manufacturing Starting Off Strong

The first manufacturing data for May came out this morning with the release of the New York Fed’s Empire State Manufacturing Survey. General business conditions remain at historically strong levels although there was some slowing in May as was expected. After hitting the highest level since October 2017 last month, it was expected to fall to 23.9 in May.The index did in fact decline, but only to 24.3. While lower, that is still around some of the strongest levels (excluding last month) in three years as more businesses continue to report improvements in business conditions than weakness.

Breadth in this month’s report was pretty mixed; namely with regards to current conditions versus expectations. Every index is still showing an expansionary reading with particular strength out of the indices for the present situation.In fact, most of those indices still sit in the top decile of their historical range with a few like those for unfilled orders, delivery times, and prices even at or just off of record highs.But there were a handful that moved lower: delivery times, inventories, and number of employees.

Regarding expectations, it was much harder to find an increase. Delivery times and technology spending were the only two of these indices to rise month over month. While many indices for expectations still sit at historically strong levels, there are more that are middling within their respective historical ranges. Overall, the report showed that New York area firms have seen a peak in optimism even as they continue to report strong conditions.

Demand certainly appears to be one area without much in the way of weakness.New orders rose 2 points month over month to 28.9.That is the highest level in just over 15 years and the only other readings as high occurred throughout late 2003 to mid-2004.Those orders are making their way out the door at an increased rate too as shipments climbed to 29.7.That index has been making a vertical climb since the winter as it reached its highest level since August 2007.

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