economy Markets

If You Squint, There’s Some Hope In The Empire Survey. But Mind The Capex Plans.

"Good" is an extremely relative term.

If you were searching for some positive news on a day when US-China tensions are flaring and the latest read on retail sales in the world’s largest economy somehow managed to come in worse than expected despite overtly dour forecasts, you might look to the Empire manufacturing gauge.

The headline on general business conditions was -48.5 for May, much better than the -60 consensus was expecting.

To be clear, -48.5 would be unthinkable outside the current context. Indeed, it’s the second-worst print in series history. But, it represents a sharp rebound from April’s -78.2.

If you squint, you can see the expectations index rose to 29.1 from 7. That’s notable – I guess.

“On the whole, firms expected business conditions to be better in six months”, the color that accompanies the release reads. The New York Fed flags significant increases for the indexes of future new orders and future shipments.

That said, the rest of the report is unsurprisingly depressing. Indexes for capex and tech spending are still sub-zero, suggesting firms plan to reduce spending going forward.

Last month, Goldman slashed its outlook for cash usage for corporate America in 2020. S&P 500 companies’ cash spending will plunge by a third this year, the bank said, projecting a 27% slide in capex.

The employment index in the New York Fed survey rose sharply from last month, but it’s still negative too, which means jobs are being lost, albeit at a much slower pace.

15% of respondents said activity had improved since April. 63% said it worsened.


1 comment on “If You Squint, There’s Some Hope In The Empire Survey. But Mind The Capex Plans.

  1. Isn’t the Empire manufacturing gauge a month to month comparison? So the fact that it is still negative means that it is worse than the previous month (not as compared to the prior year data?).

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