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First Cut: New York Fed’s survey of manufacturing show conditions slower, six-month outlook gloomier

The general business conditions index in the New York Fed’s Empire State Manufacturing Survey for September dipped to 2.0 from 4.8 in the prior month. The index for six months from now was steeply slower at 13.7 after 25.7 in the prior month. Although conditions continue to be seen as expansionary, it is only narrowly and disappointingly so.

For current conditions, new orders were down (3.5 in September after 6.7 in August) and order backlogs remained in contraction for a fourth month (-2.6 after -9.7).  Shipments were off (5.8 after 9.3). Employment returned to a positive reading after three months of contraction (9.7 after -1.6). The workweek also resumed expansion, although only thinly (1.7 after -1.3). Delivery times continued to hover around neutral (0.7 after 0.0). Inventories rose enough that business are likely to respond with corrective actions in the next month or two (8.5 after 5.8).

A consequence of anticipation of slower conditions in the near future is that capital spending plans were sharply down (4.6 in September after 23.2 in August) to their lowest level since 4.1 in August 2016. It was a similar case for technology spending (6.5 after 17.4) which reached its lowest level since 5.2 also in August 2016.

The indexes for prices paid and received picked up a bit in September in spite of lower prices for energy. Prices paid were up to 29.4 after 23.2 in the prior month, and were the fastest rise since 34.1 in March. Prices received in September were at 9.2 after 4.5 in August and the fastest since 12.4 in May.

The New York-ISM equivalent index — which is calculated from the five components closest to those in the ISM Manufacturing Index — was not much changed at 52.8 for September from 52.0 in August. The index got its slightly higher reading from the pick up in employment, but it does not suggest that broader conditions for the factory sector have regained upward momentum.

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