Friday, April 17, 2009

New York and Philly Fed Indexes

From Econoday. Click for a larger image.

From the NY Fed:

The Empire State Manufacturing Survey indicates that conditions for New York manufacturers continued to deteriorate in April, but at a much slower pace than in recent months. The general business conditions index climbed 24 points from its March record low, to -14.7. The new orders index shot up 41 points to a reading just below zero, and the shipments index rose 25 points, also reaching a level near zero. The inventories index continued to fall, hitting a record low -36.0. The indexes for both prices paid and prices received remained negative. The index for number of employees, while negative, improved in April, but the average workweek index fell. Future indexes were much improved, with the future general business conditions, new orders, and shipments indexes rising sharply to levels not seen since September of last year. The capital spending and technology spending indexes remained below zero, although they were considerably above last month’s levels.

Let's take this in pieces:

-- Referring to the chart above, the gray line was decreasing for 7 months, albeit not continually. That means the latest news is counter-trend. Before we get excited about the change in direction, remember we need additional data to day things are definitely better.

-- The general change is encouraging; a jump of 24 points is good news.

-- In addition, the jump in new orders and shipments is also encouraging. However it's one months worth of data.

-- The continued drop in inventories is also encouraging because it indicates people are getting more and more "down to the bone" and will be forced to by simply to have a few items in stock.

Here is the summation paragpaph from the Philly Fed report. Click for a larger image

The survey has similar points as the New York Fed's Report:

-- The overall index increased. BUT as the chart at the top of this post notes we're still at low levels. The line that represents the Philly index does appear to be bottoming, but we need more data and a strong and continued move higher to say for sure. In addition, the index has been negative for 16 of the last 17 months.

-- While the new order number rose, the shipments number decreased.

-- The future expectations index has been positive for the last 4 months. However, it's easy for people to say "things will get better". It's a good sign , but take it with a grain of salt.

There are encouraging signs. BUT -- the data points supporting that statement aren't numerous. Instead they are one or a few months worth of data. So keep that in mind when reading them.