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First Cut: New York manufacturing general business conditions improved, but still very weak in May

The general business conditions index in the New York Fed’s Empire State Manufacturing Survey for May regained some of the ground lost in the plunge to the historic bottom of -78.2 in April, but that doesn’t change that the -48.5 reading is the second lowest on record. On the plus side, the index for future business conditions rose to 29.1 in May after 7.0 in April and suggest that manufacturers in the New York District think conditions will be expanding respectably six months from now.

The index is not computed from components, but a measure of sentiment among survey respondents. As such, conditions seem less dire, but still very weak.

The index for new orders rose to -42.4 in May from -66.3 in April, a similar state as the general business conditions with a record low succeeded by the second lowest. Order backlogs moved deeper into contraction at -20.3 after -16.8. Shipments were also still deeply negative at -39.0 although above the record low of -68.1 in April.

Delivery times contracted to -4.1 in May, reversing the lengthening times at 11.0 in April. This hints that some of the delays along the supply chain are easing, although lack of activity may also account for the change of momentum. Inventories remained in contraction for a second month at -3.4 in May after -9.7 in April.

The index for employment rose to -6.1 in May after sliding to -55.3 in April. Hiring is absent, but massive layoff activity has mostly ceased. The index for the average workweek continued to contract, but at a slower pace at -21.6 in May after -61.6 in April.

The index for priced paid slowed further to 4.1 in May after 5.8 in April as energy costs continued to offer no upward pressure. The prices received index was not much changed at -7.4 after -8.4 as businesses had little ability to adjust prices.

The New York-ISM equivalent index rose to 40.5 in May after 31.2 in April. The calculated index has a decent correlation (0.728) with the ISM Manufacturing index. It is too early and there is too little other data to make the call, but it may offer a hint that the national measure will improve somewhat from the 41.5 in April.

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