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• NY Empire State Manufacturing Index unexpectedly dropped to -31.8 in May 2023, the lowest reading in four months, signaling a significant decline in manufacturing business activity in New York State following a strong rebound in April.
• New orders and shipments experienced sharp declines after substantial growth in the previous month, highlighting a notable contraction in demand (-28 vs 25.1 for new orders; -16.4 vs 23.9 for shipments).
• Delivery times were shortened, inventories contracted, and employment and hours worked saw further declines for the fourth consecutive month.
• Prices slightly increased, while capital spending plans turned sluggish, reaching their lowest point in three years (0.9).
• The six-month business conditions index showed only marginal improvement, suggesting businesses maintain a pessimistic outlook regarding future conditions over the next six months.

The decline observed in this dataset suggests a deceleration in economic activity and structural changes stemming from elevated interest rates. However, this data drop could potentially prompt the central bank to further ease monetary policy, fostering expectations of potential interest rate cuts.

During the New York trading session, the S&P 500 Futures contract experienced a drop but later recovered to a relatively unchanged level. The market continues to operate within a narrow and balanced price range. Traders may find support in the lower extreme, indicating a potentially bullish scenario. Market participants could interpret the data as favorable for potential interest rate cuts in the coming year, subject to further price movements and additional economic data.

Of particular note is the influence of China, where deflationary pressures may lead the People’s Bank of China (PBoC) to stimulate the economic framework through strategic interventions. This scenario places downward pressure on the Yuan’s value while the stimulation could generate increased demand in the US which might be already dampened by measures to limit China’s access to semiconductor technologies as side note.

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