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First Cut: New York Fed manufacturing conditions remain in expansion in December

The general business conditions index in the New York Fed’s Empire State Manufacturing Survey managed to eke out a small increase and rise to 3.5 in December after 2.9 in November. The index has been consistent with tepid expansion in the second half of the year. The outlook for six months from now took a decidedly more positive turn and rose to 29.8 in December after 19.4 in November and was the highest since 30.8 in July. There’s no immediate indication of a pick up for the District’s factory sector but hopes for firmer activity seem to have escalated.

If the index for orders was only narrowly positive at 2.6 in December and fell from the 5.5 in November, it remains in expansion. The orders backlogs index fell to -13.8 in December from -8.2 in November. With orders weak, backlogs have been worked down and are not accumulating fresh work that might tide over any slow spots. The shipments index picked up to 11.9 after 8.8 in the prior month as what orders are coming in are going out more quickly.

Delivery times remained narrow at -5.8 in December after -5.5 in November. Goods are moving with no delays. The inventories index rose to 2.2 in December after -6.2 in November. It is possible that stocks on hand were too lean after the caution exercised in recent months and some rebuilding was in order.

The index for employment was steady at 10.4 in December. Factories are still hiring where they can find workers with the right skillsets. The average workweek expanded only slightly at 0.8 in December after 2.3 in November. Factories have or are able to find enough workers to meet present conditions so that more hours are not needed.

Upward price pressure for inputs remained low and businesses had little pricing power. The prices paid index fell to 15.2 in December, its lowest since 15.5 in November 2016. The prices received index dipped to 4.3 in December after 6.2 in November and remained on the low side of the readings for 2019.

The New York-ISM equivalent index for December rose to 52.1 from 51.3 in the prior month. The increase was not significant. If it suggests that conditions for the factor sector have improved, it will not be enough to bring the ISM Manufacturing Index out of its string of recessionary readings for the prior four months. The ISM Manufacturing Index will be released at 10:00 ET on Friday, January 3.

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