The economic data slate was light to kick off the holiday-shortened week with the only release of note being the NY Fed's Empire State Manufacturing Survey. The report came in catastrophically worse than forecasted. Forecasts were calling for the index to improve from a reading of -14.5 in December up to -5 this month. Instead, the headline reading collapsed down to -43.7. As shown in the chart below, that's the lowest level since the spring of 2020 and before that, there was never a lower reading in the 20+ year history of the survey.

Taking a look under the hood, below we show a breakdown of each category of the report as well as its reading the previous month, the month-over-month change, and how those rank (as a percentile) versus all months of the survey's history. Obviously, with only a couple of months with lower readings, the headline number is in the bottom 1% of all readings on record. The same goes for New Orders and Shipments which were the key drivers of weakness this month. Additionally, it is worth noting that each of those categories was already sitting at historically contractionary levels (ranking in or close to the bottom deciles of their respective historical ranges) in December. While the month-over-month decline was much smaller in January, Unfilled Orders is also down near record lows. That is not to say all areas of this month's report deteriorated. Delivery Times, Prices Paid, and Number of Employees each rose month over month as did nearly all categories for six-month expectations.

Again, the two biggest declines in January were New Orders and Shipments. Like the headline number, the only period with lower readings was the spring of 2020. The fresh low in Unfilled Orders has surpassed the onset of the pandemic for the lowest reading since November 2010. Inventories are not exactly strong with the current level also in contraction, however, that category is much more elevated than others, currently ranking in the 30th percentile.

(Click on image to enlarge)

As previously noted, while current condition indices have collapsed, the same moves have not been observed for expectations. To quantify this dynamic, below we take the spread of each category's current condition index and expectations index and average across each one. As shown, the January reading dropped significantly and is now at historic lows. Again the only comparable lows to draw from were early on in the pandemic as well as late 2001, only a few months into the survey's history. That means New York area manufacturers have observed a material and significant slowdown in their businesses, but that has yet to show any impact on the level of optimism looking forward.

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