Macro Monday 24~New York Empire State Manufacturing Index
MACRO MONDAY 24
The New York Empire State Manufacturing Index
Trading View Ticker: $USNYESM
The New York Empire State Manufacturing Index (NYESM Index) is a month to month economic indicator that measures the general business conditions in the manufacturing sector of New York State. It is published by the Federal Reserve Bank of New York and is based on a survey of 200 executives from the largest manufacturing firms in the state of New York.
The top six manufacturing states in the U.S. are California, Texas, Ohio, Illinois, Michigan, Pennsylvania and then New York. Whilst New York is only ranked the 7th largest state in terms of manufacturing jobs, the state is strong in pharmaceutical manufacturing, printing and publishing, and electronics, with some of the top tier manufacturing companies including big names such as Pfizer, IBM, Lockheed Martin and L3Harris Technologies. Total output from manufacturing in New York was $75.24 billion in 2021. In comparison total output from manufacturing by the largest manufacturing state in the US - California was $394.83 billion in 2021, magnitudes larger than New York. So whilst the New York Manufacturing Index holds some weight in terms of its reputation, location and large well known firms, it is a smaller index and it should be considered in combination with other indexes/metrics to assess the broader economic picture.
How to Read the Index
As with many of the survey led indexes, it is a diffusion index that oscillates above and below the 0 level. Above 0 suggests manufacturing activity is expanding, below zero means manufacturing activity is contracting.
The Chart
In today’s chart will also attempt to see how good the NYESM Index has been at predicting general market performance/direction using the S&P500
SPX
as a market gauge:
1. One of the main findings on the chart is that 7 out of the 8 times the NYESI fell below 0 for longer than 2 months (shaded areas) the S&P500 moved lower or did not increase in price.
- This suggests that in the event the NYESM Index falls below 0 for greater than 2 months there is a higher probability that market performance will be impaired.
2. The one time the S&P500 increased whilst the NYESM Index was below 0 for greater than 2 months was from July 2022 to present.
- The index during this period was very volatile jumping briefly above the 0 level before falling under it again (see the red box). It is the only time in history that this occurred on the index. One could compare it to a sector gasping for air above the 0 level over that period, however the S&P500 was rallying hard as the index gasped for air. This highlights the need to review other indexes and charts, and not rely solely on the NYESM Index in isolation.
One such additional index that might shed some light on the S&P500 rally during point 2 above is the relative strength of the ISM Services PMI which has remained in expansionary territory throughout the same period. The Services Index is designed to measure the economic activity and health of the services sector in the United States some of which are professional services (accounting, legal, etc.), healthcare (hospitals, clinics & other practitioners), accommodation, leisure and food services. One could imagine with everyone cooped up during COVID-19, the resilience in the services metric could help explain the resilience in the market with people enjoying more experience orientated activities.
We covered ISM Services Vs ISM Manufacturing on Macro Monday 22 which you can check below in the attaching links. The ISM metrics cover all areas of the U.S. and are considered a more all-encompassing measure of manufacturing and services in the U.S. Regardless looking at individual states such as California, Texas and New York can provide clues and insights into the overall trend.
Current Readings & Expectations
The New York Empire State Manufacturing Index increased from Sept to Oct 2023 demonstrating a sharp rise from -4.6% to +9.1% pushing the Index into expansionary territory. Expectations for this Fridays release is a reduction of 7.1% resulting in a reading of 2 for the month of Nov 2023. This would still be expansionary for manufacturing in NY State but a reduction all the same, demonstrating less manufacturing to the prior month.
Lets see how the Index performs this Friday.
PUKA
The New York Empire State Manufacturing Index
Trading View Ticker: $USNYESM
The New York Empire State Manufacturing Index (NYESM Index) is a month to month economic indicator that measures the general business conditions in the manufacturing sector of New York State. It is published by the Federal Reserve Bank of New York and is based on a survey of 200 executives from the largest manufacturing firms in the state of New York.
The top six manufacturing states in the U.S. are California, Texas, Ohio, Illinois, Michigan, Pennsylvania and then New York. Whilst New York is only ranked the 7th largest state in terms of manufacturing jobs, the state is strong in pharmaceutical manufacturing, printing and publishing, and electronics, with some of the top tier manufacturing companies including big names such as Pfizer, IBM, Lockheed Martin and L3Harris Technologies. Total output from manufacturing in New York was $75.24 billion in 2021. In comparison total output from manufacturing by the largest manufacturing state in the US - California was $394.83 billion in 2021, magnitudes larger than New York. So whilst the New York Manufacturing Index holds some weight in terms of its reputation, location and large well known firms, it is a smaller index and it should be considered in combination with other indexes/metrics to assess the broader economic picture.
How to Read the Index
As with many of the survey led indexes, it is a diffusion index that oscillates above and below the 0 level. Above 0 suggests manufacturing activity is expanding, below zero means manufacturing activity is contracting.
The Chart
In today’s chart will also attempt to see how good the NYESM Index has been at predicting general market performance/direction using the S&P500
SPX
as a market gauge: 1. One of the main findings on the chart is that 7 out of the 8 times the NYESI fell below 0 for longer than 2 months (shaded areas) the S&P500 moved lower or did not increase in price.
- This suggests that in the event the NYESM Index falls below 0 for greater than 2 months there is a higher probability that market performance will be impaired.
2. The one time the S&P500 increased whilst the NYESM Index was below 0 for greater than 2 months was from July 2022 to present.
- The index during this period was very volatile jumping briefly above the 0 level before falling under it again (see the red box). It is the only time in history that this occurred on the index. One could compare it to a sector gasping for air above the 0 level over that period, however the S&P500 was rallying hard as the index gasped for air. This highlights the need to review other indexes and charts, and not rely solely on the NYESM Index in isolation.
One such additional index that might shed some light on the S&P500 rally during point 2 above is the relative strength of the ISM Services PMI which has remained in expansionary territory throughout the same period. The Services Index is designed to measure the economic activity and health of the services sector in the United States some of which are professional services (accounting, legal, etc.), healthcare (hospitals, clinics & other practitioners), accommodation, leisure and food services. One could imagine with everyone cooped up during COVID-19, the resilience in the services metric could help explain the resilience in the market with people enjoying more experience orientated activities.
We covered ISM Services Vs ISM Manufacturing on Macro Monday 22 which you can check below in the attaching links. The ISM metrics cover all areas of the U.S. and are considered a more all-encompassing measure of manufacturing and services in the U.S. Regardless looking at individual states such as California, Texas and New York can provide clues and insights into the overall trend.
Current Readings & Expectations
The New York Empire State Manufacturing Index increased from Sept to Oct 2023 demonstrating a sharp rise from -4.6% to +9.1% pushing the Index into expansionary territory. Expectations for this Fridays release is a reduction of 7.1% resulting in a reading of 2 for the month of Nov 2023. This would still be expansionary for manufacturing in NY State but a reduction all the same, demonstrating less manufacturing to the prior month.
Lets see how the Index performs this Friday.
PUKA
Comment:
PRESS PLAY ON THE CHART FOR THE UPDATED READING
NY Empire State Manufacturing Index
Rep: -20🚨 Much Lower than Expected 🚨
Exp: -7.0
Prev: -2.4 (no revision)
Last month we had strong recovery from -43.7 to -2.4 however manufacturing was still in contractionary territory <0 on the chart. Now we have reversed trend and fallen back down from -2.4 to -20
We dipped down below the level consistent with historic recessions (sub -35 level) in Jan 2024, when we went below this level to -43.7.
Framing the recent readings and chart structure
The index during this period was very volatile jumping briefly above the 0 level before falling under it again (see the red box🟥). It is the only time in history that this occurred on the index. One could compare it to a sector gasping for air above the 0 level over that period, however the S&P500 was rallying hard as the index gasped for air. This highlights the need to review other indexes and charts, and not rely solely on the NYESM Index in isolation.
⚠️7 out of 8 times the NYESMI fell below 0 for >2 months the
SPX
moved lower or did not increase in price. Currently moving into 4th month....
⚠️Sharp declines in the NYESMI also preceded the last 2 recessions and we have had a sharp decline
⚠️ We have crossed a level (-35) that in the past was consistent with recessions.
How to Read the Index
As with many of the survey led indexes, it is a diffusion index that oscillates above and below the 0 level. Above 0 suggests manufacturing activity is expanding, below zero means manufacturing activity is contracting. So presently we are firmly in contractionary territory.
Limitations of Chart
Important to note that this chart only goes back to 2001 and thus we have limited dataset. Nonetheless this is a concerning and stark reading released today.
Please see the Macro Monday below which explains the NY Empire State Manufacturing Index fully
PUKA
NY Empire State Manufacturing Index
Rep: -20🚨 Much Lower than Expected 🚨
Exp: -7.0
Prev: -2.4 (no revision)
Last month we had strong recovery from -43.7 to -2.4 however manufacturing was still in contractionary territory <0 on the chart. Now we have reversed trend and fallen back down from -2.4 to -20
We dipped down below the level consistent with historic recessions (sub -35 level) in Jan 2024, when we went below this level to -43.7.
Framing the recent readings and chart structure
The index during this period was very volatile jumping briefly above the 0 level before falling under it again (see the red box🟥). It is the only time in history that this occurred on the index. One could compare it to a sector gasping for air above the 0 level over that period, however the S&P500 was rallying hard as the index gasped for air. This highlights the need to review other indexes and charts, and not rely solely on the NYESM Index in isolation.
⚠️7 out of 8 times the NYESMI fell below 0 for >2 months the
SPX
moved lower or did not increase in price. Currently moving into 4th month.... ⚠️Sharp declines in the NYESMI also preceded the last 2 recessions and we have had a sharp decline
⚠️ We have crossed a level (-35) that in the past was consistent with recessions.
How to Read the Index
As with many of the survey led indexes, it is a diffusion index that oscillates above and below the 0 level. Above 0 suggests manufacturing activity is expanding, below zero means manufacturing activity is contracting. So presently we are firmly in contractionary territory.
Limitations of Chart
Important to note that this chart only goes back to 2001 and thus we have limited dataset. Nonetheless this is a concerning and stark reading released today.
Please see the Macro Monday below which explains the NY Empire State Manufacturing Index fully
PUKA
Rep: -2.4✅Improved Reading from -14 to -2.4 ✅
Exp: -14.0
Prev: -43.7 (no revision)
Strong recovery from -43.7 to -2.4 however manufacturing is still in contractionary territory <0 on the chart. We dipped down below the 100% recession level sub -35 level on last months reading.
Framing the recent readings and chart structure
The index during this period was very volatile jumping briefly above the 0 level before falling under it again (see the red box). It is the only time in history that this occurred on the index. One could compare it to a sector gasping for air above the 0 level over that period, however the S&P500 was rallying hard as the index gasped for air. This highlights the need to review other indexes and charts, and not rely solely on the NYESM Index in isolation.