Although the week kicked off with a better than expected Empire Manufacturing report for the month of April, the report itself wasn’t particularly positive. In this morning’s release, the headline General Business Conditions Index came in at a level 10.1 versus last month’s reading of 3.7 and expectations for a reading of 8.0. While General Business conditions improved slightly, expectations declined sharply falling from just under 30 to 12.4.

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The disparity in sentiment between current conditions and expectations wasn’t just on display in the headline reading either. The table below breaks out the levels of the current conditions and expectations for each of the report’s nine subcomponents. With respect to Current Conditions, five sub-indices saw m/m improvements this month compared to four that saw declines. When it comes to expectations, though, just two components saw m/m increases while six declined.

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With rising sentiment about the present and falling sentiment looking out six months, we really saw a collapse in the spread between the General Conditions readings for the future and the present. People tend to naturally be more optimistic about the future than the present, but in this month’s survey, the spread between the two indices is practically non-existent. In fact, at the current level of 2.3, there have only been two other months since the report began back in 2001 where the spread was narrower, and there has never been a month where expectations were worse. One aspect of the chart below that we would also point out is that in two of the three prior instances where the spread got close to or below current levels, the economy was either in or on the verge of a recession. The exception was exactly a year ago in April 2018 when the spread fell to 1.40, but the fact that manufacturers are seeing little to no improvement over the next six months doesn’t provide a good starting point for economic activity in the region.