On Sunday, I wrote that May prints on the Empire and Philly gauges (both due this week) would be “scrutinized for evidence of a slowdown.”
Fast forward 24 hours and Empire manufacturing missed estimates by a mile. At -11.6, the headline gauge missed the lowest forecast from 33 economists by 17 points.
The survey logged a similarly harrowing plunge in January and May’s drop merely took us back to March’s levels. That reduced the shock value of Monday’s print. Nevertheless, it was the largest MoM decline since the collapse that accompanied America’s nationwide COVID lockdown (figure below).
One might be inclined to suggest April’s rebound was a false start.
A look at the breakdown suggested it’d be naive to write the report off as noise. For example, the new orders index dropped 34 points (figure below).
Shipments dove 50 points.
Mercifully, the employment index moved higher and the average workweek was essentially unchanged.
Prices paid fell handily, but it tells you something about the environment when a 73.7 print on the prices index is the result of a 13 point MoM decline. Prices received posted a more modest drop.
Generally speaking — and all caveats about the volatile nature of the series aside — this was a very poor showing. It’ll exacerbate growth fears, especially if the Philly survey (which can be even more volatile) corroborates it later this week.
“As in April, firms expressed less optimism about the six-month outlook than they did earlier this year,” the New York Fed said. “The capital expenditures index fell to its lowest level in several months.”
Bad news is no longer good news for the markets!
dunno. I’m tempted to like that one. Inflation is a problem and if a recession is what it takes to curb demand, I’m willing to sacrifice other people’s jobs for the safety of my own…
Anecdotal, but I’ve driven back and forth from Boston to Albany area on I-90 3 times over the past 4 weeks. Unfortunately, I have to do this drive often, but it gives me a baseline understanding of freight traffic from the Port of Boston to eastern upstate NY. The freight truck presence was high on my recent trips, similar in number to Q4 last year (yes, the holiday season). Maybe it’s all inventory build, but the Cass Freight index for March-April match the NY Empire survey (up 0.6%, down 0.5% respectively). I’m not familiar with the details, but most surveys tend to capture only early month activity for the respective monthly report. If so, the March pop and April fizzle are merely a function of broken supply chains disrupting smooth flow of goods making the data choppier than usual. I would not be surprised to see May surprise to the upside.