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First Cut: New York Fed manufacturing general business conditions narrowly positive in November

The general business conditions index in the New York Fed’s Empire State Manufacturing Survey slipped to 2.9 in November from 4.0 in October. The index for future business conditions moved higher to 19.4 in November from 17.1  in October. While expansion remains in place, it is only by a narrow margin and expectations for improvement are limited.

The index is not computed from components. The detail indexes can tell a different story, but this month support the headline. The increase in new orders (5.5 in November after 3.5 in October) is welcome but not particularly robust. Order backlogs continued to decline if at a slower pace (-8.2 after -12.5) and have been contracting for six straight months. Shipments were more moderate (8.8 after 13.0). Delivery times narrowed further (-5.5 after -2.5)  suggesting that goods are moving quickly in a period of sluggish activity. Inventories contracted further (-6.2 after -0.6) as firms moved to control stocks on hand.

Manufacturers continued to hire where they could find skilled workers. The employment index was up to 10.4 in November after 7.6 in October and was the highest since 11.9 in April.  The average workweek expanded only narrowly at 2.3 in November after 8.3 the prior month. Firms may have something like the right number of workers on hand to fill orders without needing to add hours to get the job done.

The prices paid index fell to 20.5 in November after 23.1 in October and was the lowest since 20.0 in June 2017. Some of this is moderation in energy costs, but some is that other commodity costs are not increasing. The index for prices received was essentially unchanged (6.2 after 6.3) and remained consistent with very limited pricing power.

The New York-ISM equivalent index — calculated from the five components closest to the ISM Manufacturing Index — was down to 51.3 in November from 52.1 in October. The New York data is the earliest of the regional surveys of manufacturing conditions. While it doesn’t have the strongest correlation to the ISM number, the equivalent index does suggest that the national number will remain in recessionary territory when it is reported on Monday, December 2 at 10:00 ET.

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