Empire State Manufacturing Data Showing Cracks

Cracks have been appearing in recent manufacturing data and now include a slower-than-expected 10.9 for the Empire State index. December's weakness is centered in orders with growth in new orders down nearly 6 points but still very solid at 14.5 but with unfilled orders falling into contraction, at minus 5.1 vs no change in November.

December shipments slowed by 7.0 points but are still at a strong 21.0. The workweek slowed by only 1.2 points to 8.0 while, in the report's leading indication of December strength, employment jumped 12.0 points to 26.1. Delays in delivery times eased slightly as did the build in input inventories.

Price pressures, both for inputs and selling prices, remain elevated but did ease slightly in line with the report's general slowing. Also coming back is the 6-month outlook, down 3.0 points to a still favorable 30.6.

Factory hours were weak in November as was manufacturing output in last Friday's industrial production report. The factory sector had been one of the economy's central sources of strength but does appear to be slowing going into year-end. There will be lots of data this week on the factory sector including December's Philly Fed report on Thursday and November durable goods on Friday.