2023-08-15 20:40:00 ET
Summary
- The New York Fed published the first of regional manufacturing surveys this morning, and results were disappointing.
- Whereas last month saw a slightly expansionary reading of 1.1 in the headline index, the August reading fell firmly back into contraction at a level of -19 far exceeding forecasts of -1.
- As previously mentioned, the big drop in the headline index was largely driven by weakness in new orders and shipments.
The New York Fed published the first of regional manufacturing surveys this morning, and results were disappointing. Whereas last month saw a slightly expansionary reading of 1.1 in the headline index, the August reading fell firmly back into contraction at a level of -19 far exceeding forecasts of -1.
In the table below, we show each category of the report. As shown, the drop in the headline number was almost entirely driven by significant deterioration in new orders, shipments, and employment metrics.
Breadth otherwise was actually fairly positive. As for six-month expectations, readings across the board have been much healthier.
In addition to significant increases month over month (many of which rank in the top decile of historical monthly changes), these readings are not as historically weak as their corresponding levels for the current condition indices.
As previously mentioned, the big drop in the headline index was largely driven by weakness in new orders and shipments. Each of those (as with the headline index) fell by more than 20 points month over month which ranks in the 3rd percentile of all monthly moves.
That shift from slightly expansionary to historically contractionary readings is another bout of volatility in these readings consistent with big swings in previous months.
Amidst that volatility, these readings have generally pointed to the side of demand having weakened, but expectations have begun to move in the opposite direction.
As shown below, expectations indices for new orders, shipments, and unfilled orders have all reached the highest level since March 2022.
Both prices paid and received rebounded in August with those month-over-month increases coming in the 87th and 91st percentiles, respectively, of all monthly changes. In spite of those increases, that overall picture of prices trending lower remain in place.
As mentioned earlier, aside from new orders and shipments, employment metrics were the other point of weakness for current condition indices.
However, number of employees is the most elevated category of all expectations indices after a 96th percentile month-over-month increase in August.
Meanwhile, both capital expenditures and technology spending likewise experienced large month over month jumps in August. All combined, that would indicate a dramatic turnaround in manufacturing firms' spending plans.
Editor's Note: The summary bullets for this article were chosen by Seeking Alpha editors.
For further details see:
Manufacturer Spending Plans Spin Around