Release Explanation: The Empire State Manufacturing Index is a survey of Manufacturing activity in the Fifth Federal Reserve District (It covers New York State, the 12 northern counties of New Jersey and Fairfield County in Connecticut.). It attempts to index economic activity by polling participants in regards to shipments, new orders, capacity utilization, employment, inventory, and raw materials. The Economic impact of the data has declined over the last two decades as manufacturing activity in the region moves to less expensive areas. However, like the other regional indexes, it will feed into the GDP release.
GDP is directly affected by the manufacturing activity in the country, of which the New York region is a component off. Durable goods and other releases such as Industrial output can be affected by the Richmond Fed activity. The currency may experience a slight movement on the release, but the significance of the data will be filtered down to Durable Goods and GDP, where the impact may be more significant.
Trade Desk Thoughts: Manufacturing it a record low in the New York region, according to the latest survey from the Federal Reserve Bank of New York. It was the tenth straight month of declines for the index.
The Empire State Manufacturing Index fell to 34.65 in February, weaker than the -23.0 economists' had expected, as U.S. and foreign economies continued to reel from the effects of the financial crisis spurred by the collapse of the housing bubble.
"The report is a disaster," said Matthew Carniol, chief currency strategist at TheLFB-forex.com. "There's evidence of increasing deflationary pressures and the employment components are falling both in the number of jobs and in hours worked."
The new orders index also fell to a record low, dropping 8 points to -30.5. The shipments index rose several points but remained below zero at -8.1. The unfilled orders index, at -24.1, remained close to its recent low.
The indexes for both prices paid and prices received remained negative for a third consecutive month. Although the prices paid index climbed 4 points—its first rise in seven months—it remained decidedly negative at -13.8. The prices received index fell a precipitous 17 points to a record-low -20.7, with 26% of respondents reporting that prices declined in February.
Continuing their decline, the future indexes for both prices paid and prices received fell below zero in February. This development, a first in the history of the survey, suggested that manufacturers expected both prices paid and prices received to be lower six months from now.
Employment indexes fell sharply to very low levels. The employee’s index fell 13 points to -39.0, with 44% reporting a drop in employment and 5% reporting an increase. The average workweek index slipped 7 points to a record-low -31.0, with 38% reporting a reduction in workers’ hours.
The future index for number of employees tumbled 18 points to -29.4, overtaking last month’s record low.
The lone bright spot was that the capital expenditures index held firm at -11.5. However, the technology spending index fell for a fifth consecutive month, reaching a record-low -19.5.
Forex Technical Reaction: S&P futures moved near the lows of the session, recently down nearly 2.4%. The dollar has been gaining on the higher-yielding euro, pound and Australian dollar overnight as the market turns risk-averse.