It could have been worse.
After the biggest MoM decline in history, the headline print on Empire manufacturing bounced back into positive territory in July, rising to 4.3, beating estimates and perhaps allaying fears that the US is on the verge of careening into an outright factory slump along with the rest of the world.
As a reminder, here’s what happened last month:
Fast forward to July and things were a touch better. “After declining substantially last month, the general business conditions index returned to positive territory, rising thirteen points to 4.3”, the New York Fed said Monday. “Thirty percent of respondents reported that conditions had improved over the month, while 26 percent reported that conditions had worsened”.
Despite the modest improvement on the headline, there were lingering signs of trouble. The new orders index rose, but stayed negative at -1.5, while the employment index slid further, after falling below zero last month. It’s now sitting at the lowest levels since January 2016.
Optimism improved at the margins as gauges for the six-month outlook were “generally somewhat higher than they were last month”, the NY Fed said.
One supposes “generally somewhat” better is about the best we can hope for right now while everyone waits on Fed cuts and holds their breath to see whether further escalations in the trade conflict are coming.
“Make America generally somewhat better again!”
For the bullish among you, it’s worth noting that manufacturing sentiment probably needs to pick up from here. “Bond yields have tracked growth indicators like the ISM Manufacturing index closely through this cycle and have declined in line with slowing growth while equities, on the other hand, are pricing in a significant rebound in the ISM from under 52 currently back up to around 57”, Deutsche Bank wrote Friday.