If bad news is now “good” news thanks to the perverse (albeit familiar) dynamic that comes calling when markets are leaning heavily on the assumption of central bank largesse to keep risk assets afloat, then Monday’s horrific Empire State manufacturing print is just fantastic.
The gauge plunged a truly astonishing 26.4 points from May to -8.6, making this yet another case where consensus was laughably off base. Indeed, it’s barely worth mentioning that economists were expecting a drop to 11 (from 17.8 last month). The lowest estimate was 5.
This puts the general business conditions gauge at the lowest since October 2016 which, not coincidentally, is the same situation ISM is now in. The “Trump bump” is gone, and that’s thanks in no small part to the president’s “greatest” tariffs and his most “tremendous” trade escalations, which are clearly weighing on confidence.
As the president would put it, general business conditions saw a decline “the likes of which has not been seen before!”
New orders dove a ridiculous 22 points to -12 (so, a decline in orders).
“Manufacturing firms in New York State reported that business activity declined. The general business conditions index fell by a record twenty-six points to -8.6, the first negative reading for the index in more than two years”, the report reads. “Twenty-two percent of respondents reported that conditions had improved over the month, while 30 percent reported that conditions had worsened.”
The employment index printed negative for the first time in two years and the average work week shortened.
Who knows, maybe this is all part of Trump’s master plan – engineer a deep industrial recession to force the Fed to cut rates, then take credit for the recovery.
If that’s the case, it’s working – and “big league.”