Economists were expecting a bit of weakness in the September Empire Manufacturing report, but the actual reading came in a bit weaker than those forecasts. The release of the headline General Business conditions index dropped 2.8 points from 4.8 down to 2.0. While the index of present General Business conditions only fell slightly, expectations for the next six months were notably weaker falling from 25.7 down to 13.7. While both of these indices are well off their highs from the last year or two, they also aren’t at levels that, at this point, would be considered dangerous for the economy.

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The table below breaks down this month’s report by each of the survey’s sub-indices.As far as present conditions are concerned, New Orders and Shipments both declined, but every other category for present conditions increased, and only one (Unfilled Orders) is contracting. Looking out towards the future, though, sentiment is not nearly as positive. As shown on the right side of the table, the only two indices that increased this month were Prices Paid and Prices Received. So manufacturers are expecting weaker growth and higher inflation. That’s never a good mix!

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One notable aspect of the table above is the large drops in expectations for Capital Expenditures and Technology Spending. The index that tracks plans for Technology spending fell 10.9 points from 17.4 down to 6.5 in what was the largest monthly drop since May 2016. Plans for Capital Expenditures were even worse as that index fell 18.6 points from 23.2 down to 4.6. For that index, it was the third-largest decline in the report’s history dating back to 2001 and the largest monthly decline since May 2016. Here again, though, while these declines are pretty steep, they aren’t at levels that in the past have been considered recessionary. Then again, back at the onset of the recession in December 2007 both of these levels were higher then than they are now. 

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