New York Fed's Empire State factory gauge plummets deep into negative territory
By Greg Robb
Headline index drops 42.6 points in May reading. The only larger drop came at the start of the COVID pandemic.
The numbers: The New York Fed's Empire State business-conditions index, a gauge of manufacturing activity in the state, plunged 42.6 points in May to negative 31.8, the regional Fed bank said Monday.
The only larger monthly decline came at the start of the pandemic.
Economists had expected a reading of negative 5, according to a survey by the Wall Street Journal.
Any reading below zero indicates deteriorating conditions.
Key details: The index for new orders dropped 53.1 points to negative 28 in May, reversing completely a sharp 46.7-point gain in April.
The shipments index fell 40.3 points to negative 16.4, almost reversing a 37.3-point gain in the prior month.
Unfilled orders fell 13.2 points to negative 13.2.
The measure of expectations six months ahead ticked up 3.2 points to 9.8 in May.
Big picture: Last month, the Empire State index exceeded expectations and jumped 35.4 points to 10.8. Today's decline wiped out all that improvement and adds to fears about a recession.
The recent volatility in the data has been a puzzle for economists. In general, there is widespread pessimism about the manufacturing sector. Higher interest rates have cooled capital spending, and overseas activity has been tepid. Even China's reopening from COVID restrictions has not been a spark for manufacturing that many expected.
What are they saying? "This reinforces our expectation that manufacturing production and industrial output are likely to soften materially through year-end as demand slows," said Mickey Levy, chief economist for Americas and Asia for Berenberg Capital Markets.
Market reaction: Stocks were higher in early afternoon trading on Monday, while the yield on the 10-year Treasury note rose to 3.51%.
-Greg Robb
This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
05-15-23 1328ET
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