Empire State Manufacturing Survey Moves Sharply Lower

Whether tariff effects are to blame is uncertain but the Empire State report has suddenly shifted deep into the negative column. At minus 8.6, June's index is far below Econoday's consensus range and is the worst showing since October 2016. The monthly change, at minus 26.4, is the steepest on record in data going back to 2001.

New orders are now at minus 12.0 for the lowest reading since January 2016 with the monthly change from May at negative 21.7 for the steepest single-month decline since November 2010. Unfilled orders are down 17.9 points this month to minus 15.8 with employment at minus 3.5. Shipments are still moving out the door, at plus 9.7 this month but down 6.6 points from May. Prices readings are mixed with input pressures remaining elevated at 27.8 but selling prices easing nearly 6 points to plus 6.8.

Topping off June's disappointment is the sample's outlook which is measurably less optimistic this month, at 25.7 for a nearly 5 point decline from May. Respondent commentary isn't included in this report but tariff actions are the likely culprit.

For the Federal Reserve, this report may be a warning for this week's FOMC meeting, suggesting that the manufacturing sector, which has been struggling all year, may now be tilting into contraction. Note that additional tariffs were levied against $200 billion of Chinese imports last month with tariffs on $300 billion of other Chinese imports possibly moving higher at the beginning of next month. Today's results may well pull down forecasts for Thursday's manufacturing report from the Philadelphia Fed where moderating growth was already the expectation.