The New York Fed’s Empire State Business Conditions Index, a gauge of manufacturing activity in the state, surprised economists by rising 21 points in September to 1.9, according to a survey by the Wall Street Journal. This gain is a significant turnaround from the 20.1 point drop experienced in August. It’s important to note that any reading above zero indicates improving conditions.
The index for new orders saw a substantial increase of 25 points, reaching 5.1 in September. Similarly, the shipments index experienced a sharp rise of 24.7 points, reaching 12.4. However, unfilled orders only inched up by 1.6 points to negative 5.2, suggesting a continued decline. Inventories also declined once again during September. Furthermore, labor market indicators pointed to a slight decrease in employment levels and the average workweek.
Expectations for business conditions six months ahead saw a notable increase of 6.4 points, bringing it to 26.3, which happens to be the highest level in over a year.
The Big Picture
The Empire State Index has shown significant volatility throughout the year, with two instances of falling below negative 30 before recovering. This regional Fed data serves as an early indicator of overall factory conditions in the country. Notably, the ISM Manufacturing Index, a crucial gauge of the nation’s factory sector, has contracted for ten consecutive months through August.
Given these positive manufacturing indicators, stocks were expected to open higher on Friday. Additionally, the 10-year Treasury note yield rose to 4.32%.