Manufacturing Soars in New York, Tumbles in Philly

The manufacturing sector is continuing to grow for the third straight month in October. The Empire State survey shocked analysts by climbing 16 points in the month to +34.6, its highest level in five years. The Philadelphia survey was less impressive as its headline tumbled more than 2 points to +11.5, but together the regional reports point to improvement in the nationwide ISM survey.

In the New York survey, over half of the executives surveyed said conditions were improving this month, while only 17% said conditions deteriorated. The new orders index rose 11 points to +30.1 and the shipments index shot up 30 points to +35.1. 

Even more surprising (and uplifting), both employment indexes in New York were positive for the first time in more than a year. The number of employees index leapt 19 points to +10.4, and average workweek hours rose sharply, moving up 15 points to +20.8. One-quarter of respondents said employment increased in October, while 16% said they had shrunk. 

In the Philly Fed index, which tracks conditions in Philadelphia, New Jersey, and Delaware, the headline remained in growth mode as general activity, new orders, and shipments were all positive. In all, 28% of firms said conditions are improving this month, while 17% said a reversal was taking place.

Unlike the New York survey, labor conditions remain weak, though the report notes “widespread declines have moderated considerably,” The jobs index climbed up from -14.3 in September to -6.8 this month, its highest reading in 13 months.

Looking ahead, executives in New York expect employment to rise over the next six months, with capital spending increasing and general sentiment remaining high. In Philadelphia, future activity indexes remained positive for the 10th straight month, but the expected pace actually fell 8 points to +39.8, the lowest reading since April. Moreover, 35% of firms said they had revised capital spending downwards due to the economic climate.

Carl Riccadonna, economist at Deutsche Bank, said it is premature to draw conclusions about the sector’s outlook for this month. A tentative forecast would put the ISM survey up four-tenths to 53.0, he said, but a firmer grasp of the manufacturing sector won’t be held until the Chicago PMI numbers hit markets on Oct. 30.

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