On Tuesday morning, we got the first update on regional manufacturing activity for April with the release of the New York Fed's Empire State Manufacturing Survey. The headline reading came in better than expected, rising from a 15-month low of -20 last month to -8.1 in April. While that marks a second straight month of observed contractionary activity, expectations appear even worse. That index fell an enormous 20.1 points month over month for the second-lowest reading in the survey's history. That month that was worse: September 2001. Regarding the month-over-month move, September 2001 and March 2020 are the only other months with bigger drops.

In the table below, we include a look at the April and March readings across all categories of the report. We include the sequential change and how those all rank in percentiles.  As shown, breadth and levels were not too bad for current conditions whereas six-month expectations look disastrous including a handful of record lows and bottom quintile monthly declines.

To quantify the drops across those expectation categories, below we have taken a standard deviation for each category and then averaged across them. As shown, that reading dropped into negative territory this month. In the post-pandemic period, there have been a couple of other months to also see negative readings (in July and November 2022), although this current reading is considerably lower. As such, April's reading of -0.12 is the worst since April 2020, and before that, only the Great Recession and 2001 saw weaker expectations. Likewise, the more than one standard deviation drop over the past three months marks one of the most rapid declines in expectations on record.

As noted earlier, the drop in expectations indices has led to record lows in some. That applies to new orders and shipment expectations with current condition indices for both categories also remaining in contraction.  That would indicate the region's firms have been observing softening demand, and things are only expected to get worse.

It's not exactly a silver lining, but not every category has fallen sharply. Two categories in the upper quintile of readings with sharp moves higher in the past month were inflation-related. Prices paid and prices received are both rocketing higher in terms of current conditions and expectations. For current conditions of both categories, this was the most elevated level since August 2022.  As for expectations, it was the highest level for prices paid since June 2022, and April 2022 for prices received.

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