A Routine Look at the Empire Survey Morphs Into a Mini Screed

Full report here

From NY Fed:

Business activity grew at a solid clip in New York State, according to firms responding to the April 2018 Empire State Manufacturing Survey. The headline general business conditions index, at 15.8, remained firmly in positive territory, although its seven-point decline from its March level pointed to a somewhat slower pace of growth. Similarly, the new orders index and the shipments index suggested ongoing, albeit more measured, growth, with the first index falling eight points to 9.0 and the second declining ten points to 17.5. Delivery times continued to lengthen, and inventories moved higher. Labor market indicators pointed to a small increase in employment and significantly longer workweeks. The indexes for both prices paid and prices received remained elevated. Firms’ optimism about the six-month outlook waned sharply, with the index for future business conditions plunging twenty-six points to its lowest level in more than two years.

Here are the visuals, with my mark ups of what seems significant. Current activity is still growing, but faded. Expected activity is still growing but got harpooned I assume because of the US/China Trade War sabers.

New order growth has been fading since mid-2017 and inventories have been growing since late 2016.

Prices paid have marched steadily higher since Q1 2016, which maybe not coincidentally was when gold turned up, silver turned up and led a whole raft of inflation trade items like Industrial Metals, Materials, Financials and many broad US and global stock markets upward.

As for employment, it appears companies have eased up on hiring but while business is still good they are dishing out a lot of overtime rather than commit to new hires. It seems like somewhat cautious signalling to me as manufacturers are already burdened with rising prices of materials, etc. and don’t want to add payroll.

Here is a graphic from a post I did after the January ISM report. My comments are above and below the data. Today’s Empire report continues a version of that theme.

Moving on, I’d attribute much of this to Trump/China jitters. Hey guys, Trump is here to save you, not impair your ability to do gainful business. No, Trump is here is devalue the dollar and protect a small but politically sensitive sub-section of the greater manufacturing complex.

Bottom Line

As the president of the United States moves forward with plans to bring us back to the 1970s, when steel makers of yore proudly worked in cavernous dungeons fashioning the earth’s minerals into the materials of our autos, appliances and skyscrapers, prices paid by US manufacturers are rising and employment is being tamped down, just as one malcontent former manufacturing guy who writes this post said would be the case.

Workers are not going to get their fair share in an inflationary regime. They are going to be used while business is good but as the currency devaluation err management process flies up its own ass to the degree that prices get beyond what businesses can or are willing to absorb, people are going to be shown the door in materials and labor intensive areas. See those down spiking forward-looking indicators? Those are the people who make business decisions, like hiring.

It still says here that automation and progress were/are the only way forward. But alas…

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