The Empire State Manufacturing Report took a sharp nosedive this month, falling 26.4 points to -8.6 as reported this past Monday. This precipitous drop represents the first time the index has dipped into negative territory since October of 2016. Any number below zero represents a contraction in manufacturing activity in New York state. Analysts had predicted a significantly more favorable number of +10.
Friction in trade policy between the U.S. and more recently Mexico remain the cause for manufacturing being a drag on the overall economy in 2019. Weak auto sales and an overall slowdown overseas as a result of tariffs and fears of even more tariffs are having a chilling effect on U.S. manufacturing, but some experts remain optimistic that this dismal report was a temporary response to the now-canceled tariff on Mexico, which would have wreaked havoc on the auto industry. Ian Shepherdson, founder and Chief Economist of Pantheon Macroeconomics said the drop was “was likely just a temporary response to the Mexico tariff fiasco.”
In a report full of weakness, the new orders index was an important metric, sinking 21.7 points to -12. Shipments also fell substantially to 9.7, a drop of 6.6. If there could be a bright side in the report, the Future Activity index only fell 4.9 points to 29.7. The technology spending index fell 10 points to 12.8.
Whatever the future holds, indexes that asses the six-month outlook showed little optimism compared to last month. The report states: “The index for future business conditions fell five points to 25.7. The indexes for future new orders and shipments fell to similar levels. Firms expected solid increases in employment but no change in the average workweek in the months ahead. The capital expenditures index fell sixteen points to 10.5, pointing to slower growth in capital spending plans, and the technology spending index fell ten points to 12.8.”