Empire State Manufacturing Survey for June: Slightly Better?

Each month the Federal Reserve Bank of New York releases the Empire State Manufacturing Survey (ESMS) which tracks manufacturing activity in New York.  Although this particular survey does not necessarily shake markets up, the nice people at the Federal Reserve like to look at the ESMS because it provides hints on the forthcoming (and highly influential) Institute for Supply Management (ISM) Manufacturing Index (for a quick refresher).  It is designed to gauge the present condition of New York's manufacturing industries, as well as what company execs believe they will do in the next six months.
Positive index number indicates that more respondents believe that the index will move higher than lower.  A negative index number tells us that more respondents were expecting that variable to decrease than increase.

Things to notice when looking at the Empire State Manufacturing Survey:

1. General Business Conditions Index- where a positive index number is a sign that factory activity is strengthening. This index edged up slightly from 19.11 in May to 19.57 in June. 

2. New Orders Diffusion Index- where a jump in new orders is a good sign that factories will keep on producing.  We see a nice increase in new orders with the index rising from 14.3 in May to 17.53 in June. 

3. Unfilled Orders- which measures how overburdened (or under burdened) manufacturers are.  The larger the index number the more businesses may want to spend to expand production capacity to satisfy customers with snappier deliveries.  We have seen a nice improvement here as this index went from -7.89 in May to -1.23 in June.

4. Prices Paid- because the first signs of inflation appears here as factories ultimately pass higher costs onto consumers.  Keep in mind that the Fed monitors this section closely (price stability is part of the Federal Reserve's dual mandate).  Inflation does not seem to be as eminent on the horizon as it was last month but input prices are still expected to increase as this index moved from 44.74 in May to 27.16  in June.

5. Prices Received- as these help to forecast changes in corporate earnings. There is little change here as the index moved slightly downward from 5.26 to 4.94. 

6. Number of Employees- which is the earliest indicator available on labor conditions for the month.  This is where you preview changes in manufacturing jobs that could be seen in the official employment situation report.  Unfortunately we don't see the enthusiasm we saw last month in this indicator as it contracted from 22.37 in May to 12.38 in June.  This means that more firms this month than last month will be looking at lowering their number of employees and reducing their search for new hires.

From the NY Fed:

"The Empire State Manufacturing Survey indicates that conditions for New York manufacturers improved in June. The general business conditions index edged up from its May level to 19.6, extending its string of positive readings to eleven months. The new orders and shipments indexes were also positive and higher than their May levels. The inventories index remained near zero for a second straight month, indicating that inventory levels were little changed."