Empire State manufacturing index plunges in August

The Empire State manufacturing index plunged to -14.9 in August, the weakest reading for the index since August 2009. The large decline came in well below expectations (forecast: 5.0, consensus: 4.5) and represents a sharp contraction in regional manufacturing activity in mid Q3. New orders (-15.7, previous: -3.5) and shipments (-13.8, previous: 7.9) led the decline. The employment index fell modestly (1.8, previous: 3.2) but remained in positive territory. Softness in prices, inventories, delivery times and the average workweek, on balance, further depressed the headline index.

Manufacturing activity in the Northeast region has been choppy since the end of last year. Harsh winter weather in Q1 was followed by headwinds from lower oil prices and a stronger dollar. As a result, the Empire State index hovered around the neutral mark for much of Q2. The August reading marks the broadest slowing in activity since the recession; however, given the limited manufacturing base in the New York area, we take this morning's negative surprise with a grain of salt.

"We look to Thursday's release of the Philadelphia Fed manufacturing index for a more reliable reading on the state of Northeast regional manufacturing activity", says Barclays.