New York Manufacturing Expands On Uptick In Prices
The Empire State Manufacturing Index, the broad measure of manufacturing activity with the New York Fed's region, unexpectedly rose in the beginning of June from May. However, the internals in the report point to an uptick in pricing as the driver of the increase as key internal indicators were soft.
For June, the Empire State Manufacturing Index rose to 7.84 compared to the 0.0 reading expected by economists. For statisticians out there, this beat represents a whopping 3.44 standard deviation beat of expectations, an extremely unlikely outcome.
The result for June also represents a significant increase form May. The 7.84 reading in June trumps May's contraction of 1.43 and points to a continued pattern of oscillating results for the index. Looking back over the past few years, the index has been very cyclical and seasonal along with the broader economy.
Internals Tell a Different Story
The internal indices of the index tell a different story than the headline report. The only positive internal index in the entire report was the prices received, which saw a sharp uptick in June, meaning that companies had larger pricing power in June than in May.
However, new orders, a leading indicator, declined further in June and shipments fell significantly. Meanwhile, prices paid were roughly flat and employment was flat month over month despite the average workweek declining from May.
Adding further weakness in the report was the decline in future expectations. The outlook of business executives six-months out declined in the month more CEO's see uncertainty over the next six months. Interestingly, more executives see both better future conditions and more see worse conditions in the future with the number of those undecided declining.
Notably, the future outlook for employment growth declined in June from May and the outlook for input price increases jumped, signaling that companies see increased inflation over the next six months.
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