Empire Survey Shows Improving Manufacturing Optimism At End-Q2

The NY Fed's Empire State Manufacturing index came in a little stronger than expected in June at -6.0 (-10.0 expected, -15.6 prior). This was the biggest monthly increase since November 2023, to the least-negative reading since February 2024.

• The Empire survey, while historically volatile, on balance represented a positive start to June's round of regional Fed manufacturing readings. While activity continues to contract, the survey provided signals that pronounced 2Q weakness may have represented a trough in activity in New York State for now.
• The positive signals included: Prices Paid slipped to the lowest since January (24.5) after four relatively elevated months, with prices received dipping slightly, suggesting softening inflation pressures. New Orders jumped by 15.5 points to -1.0, the best reading since July 2023, Shipments turned positive after 3 months of contractions, and expectations for activity 6 months ahead rose by 15.6 points to 30.1, the highest since March 2022.
• On the other hand, some indicators in the survey were softer: hiring remained weak (the number of employees index slipped 2.3 points to -8.7, near the post-pandemic lows), while capex expectations remained 2.0 for a 2nd consecutive month, both joint-lowest since May 2023 and among the weakest readings outside of a declared recession.
• Supply availability, which was available in this report for the first time, was -1.0, indicating little change (this was firmly negative in the backdated series through early 2022 amid global supply chain problems).