Tuesday will be one of the last Federal Reserve reports that the FOMC gets to digest ahead of its decision on interest rates. The Federal Reserve Bank of New York will release its Empire State Manufacturing Index for the month of September. The big question here is whether the report will be anywhere as close to as ugly as the August report.
Several things have to be kept in mind here, hence the “ghosts” for investors and economists. August’s report was shockingly bad. Many data points have gotten worse in US readings and in international readings. Many of the woes of China have not fully trickled into the US economy yet. Investors at the start of September had also just been bettered and bruised by a rocky August.
Econoday provides many economic views. Their report expectations are for the Empire Manufacturing report to still be negative in September. That being said, they see only a -0.50 reading versus that extremely negative reading of -14.9 in August. Econoday’s range is as low as -6.0 to as high as +5.0 for Tuesday’s reading of September.
What is hard to judge here is the impact from China and the stock market sell-off that came in August. These are both hard to interpolate on a next-month basis because factory and manufacturing orders are often committed to months in advance. Outside of the new orders and shipments from August, there were at least some flat and positive readings that may account for why there is hope for a flat or slightly positive bounce in September’s report. This is what the New York Fed report said a month ago:
The inventories index dropped to -17.3, signaling that inventory levels were lower. Price indexes showed that input prices were slightly higher, while selling prices were flat. Labor market indicators suggested that employment levels and hours worked were little changed. Indexes for the six-month outlook registered somewhat greater optimism than in July, with the future general business conditions index rising seven points to 33.6.
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Econoday did note ahead of Tuesday’s report that the focus on this September report will be on new orders. That reading fell down to -15.7 in August and was the weakest reading in 5 years. As a reminder, not all regional Fed district reports were as negative as the Empire report from the New York Fed last month.
The New York Fed polls a group of about 175 manufacturing executives at the start of each month. These are monthly reports are around the changes from the previous month, so it tries to act as a semi real-time indicator.
Below is a graph that shows just not just how bad the Empire Manufacturing report was in August. It also shows how bad it was against expectations.
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