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First Cut: New York Fed’s Empire State Survey reflects continued modest-to-moderate expansion

The general business conditions index in the New York Fed’s Empire State Survey of Manufacturing rose to 10.1 in April from 3.7 in March. The level is in line with the past five months where activity has reset to a less heated pace than in most of 2018. Conditions are expanding, if a bit unevenly in alternating between softer and firmer months.

The index for conditions six months from now fell to 12.4 in April, the lowest since January 2016 when it as 9.5. The drop may be related to uncertainties about trade and tariff policy, and further sluggishness in global growth. If trade talks with China come to a successful conclusion soon and the lingering challenges in accomplishing Brexit are resolved, expectations may pick up again.

The subindex were mixed. On the up side, there was a gain in new orders (7.5 in April after 3.0 in March), although backlogs contracted (-0.7 after 2.2). Shipments continued about on trend (8.6 after 7.7), as did employment (11.9 after 13.8). The workweek picked up, probably in part on milder weather (4.3 after -3.4). The same was likely the case for delivery times (7.0 after 1.4) with backlogged orders needing to catch up. Inventories rose (8.4 after 0.0) to the highest level since 10.9 in November 2018. Manufacturers are going to be alert and cautious about letting inventories accumulate while activity is slower.

The index for prices paid fell to 27.3 in April after 34.1 in March, probably on commodities other than energy. Costs for oil and other energy goods have been on the rise of late. Prices received moderated to 14.0 from 18.1. Businesses still have some price power.

The New York-ISM equivalent index rose to 54.3 in April from 52.6 in the prior two months. Although this District’s data does not have the strongest correlation with the ISM Manufacturing Index, it does hint that the national report could increase somewhat from the 55.3 in March when the numbers are released at 10:00 ET on Wednesday, May 1.

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