US ECON: Empire State Index Dropped to 9.13 from 22.19 Dec

Manufacturing activity in New York state slowed in January as the Empire State index slipped to 9.13 from a revised 22.19 (prev 23.13). The reading compared to expectations for a print around 20.0. The indexes for new orders and shipments fell sharply but remained well above the zero mark. Unfilled orders remained in negative territory and inventories fell further into negative territory. Prices paid increased slightly. Note that the data have undergone an annual benchmark revision. All historical data have been revised and new seasonal factors were released.

It is important to note that this index is not a composite index like the ISM but rather a query about general business activity. The numbers are also centered on zero rather than 50, so any positive number represents expanding business conditions while negative numbers represent softening conditions. If the components were weighted like the ISM (but centered on zero) the Empire index would have posted at 5.77, it lowest reading in 19 months vs. 15.86 in December. The slippage casts a softer tone on the manufacturing sector at the start of the year but other regional reports will be needed before drawing any firm conclusions. It does suggest the potential for a slightly softer reading than initially expected on the Philly Fed index (due Thursday, January 18). Expectations were for a reading of 3.0 vs. -2.3 in December. This could mean the index remains below the zero-mark.

The new orders index fell to 10.26 from 222.52. The shipments index fell to 16.11 from 27.60. The unfilled orders index posted at -8.51 vs. -14.61 in December while the delivery time index slipped to -5.32 from 1.12. The inventories index also slipped to -19.15 from -7.87. It was the lowest reading on the inventories since July 2002 (-20.0). The prices received index rose to 19.15 from 13.48 while the prices paid index jumped to 35.11 from 28.09.

The employment index fell to 6.91 from 14.13. It remains well below its Q4 average of 19.34. The average employee workweek dropped to -1.06 from 7.87. It was the first negative reading on the index since July 2005 (-3.92). Outlook indexes were mixed and seemed to imply expectations for more modest growth ahead. The future general business conditions, new orders, and shipments indexes each fell. The general business conditions outlook index fell to 32.54 from 41.85 while the new orders outlook index slipped to 34.14 from 44.62. The shipments outlook index fell to 28.47 from 40.73. Future price indexes were little changed from December. The outlook index for the number of employees also rose to 31.12 from 30.37. The capital expenditures index was 31.91 vs. 39.33.