Empire State Manufacturing: Lowest Since May

Note from dshort: The Empire State Manufacturing Survey is not an indicator I routinely follow. But the government shutdown has delayed the October 17th release of the Federal Reserve's Industrial Production and Capacity Utilization report -- one that I follow closely. As a result, I'm extending my boundaries in searching for clues about the economy.

This morning we got the latest Empire State Manufacturing Survey. The diffusion index for General Business Conditions disappointed expectations, posting a weak expansionary reading of 1.52, down from 6.29 last month. This is the lowest reading since the contractionary -1.43 in May. The Investing.com forecast was for 7.0. As Investing.com points out, "The Empire State Manufacturing Index rates the relative level of general business conditions New York state. A level above 0.0 indicates improving conditions, below indicates worsening conditions. The reading is compiled from a survey of about 200 manufacturers in New York state."

Here is the opening paragraph from the report:
The October 2013 Empire State Manufacturing Survey indicates that business conditions held steady for New York manufacturers. The general business conditions index fell 5 points to 1.5. The new orders index rose five points to 7.8 and the shipments index fell three points to 13.1, suggesting that both orders and shipments increased modestly over the month. The prices paid index was unchanged at 21.7 and the prices received index fell six points to 2.4. Labor market conditions were also steady, with the index for number of employees falling four points to 3.6 and the average workweek index inching up to 3.6. Indexes for the six-month outlook continued to convey a strong degree of optimism about future business conditions.

Here is a chart illustrating both the General Business Conditions and Future General Business Conditions (the outlook six months ahead):

Click this link to access a PDF set of charts of the individual components over the past 12 months.

Since this survey only goes back to July of 2001, we only have one complete business cycle with which to evaluate its usefulness as an indicator for the broader economy. Following the Great Recession, the index has slipped into contraction four times, the most recent being the one-month decline in May. However the expansionary interim highs since the post-recession peak in October 2009 have gotten successively smaller, which is indicative of a generally slowing regional economy.

The Empire State Survey is focused on manufacturing, so it's only a subset (albeit a very large one) of the Federal Reserve's Industrial Production Index, which covers manufacturing, mining, and electric and gas utilities. See the upper left corner in the four-pack below. Note that this four-pack illustrates the percent off the all-time high.

Ordinarily I would be updating the Big Four with the latest Industrial Production data and Real Retail Sales (lower right chart, which requires the Consumer Price Index to calculate). But, thanks to our dysfunctional congress, we have a government shutdown ... hence no industrial production data, no retail sales data and no read on inflation.

Meanwhile, here's another look at the latest ISM Manufacturing Business Activity Index.

I'll keep a close eye on some of the regional manufacturing indicators in the months ahead.