Empire State manufacturing index falls to lowest since 2009

Manufacturing activity in the New York jurisdiction deteriorated sharply in March, posting its worst one-month drop on record to the lowest level since 2009, according to data released on Monday.

The New York Fed’s Empire State index slid 34 points to -21.5, missing expectations for a reading of 3.0

According to the survey, 20% of respondents reported that conditions had improved over the month, while 42% reported a worsening.

The new orders index turned negative, declining 31 points to -9.3, while the shipments index tumbled to -1.7 from 18.9 the month before.

Meanwhile, optimism about the six-month outlook also deteriorated, with the index for future business conditions down 22 points to 1.2 - also its lowest level since 2009.

Ian Shepherdson, chief economist at Pantheon Macroeconomics, said: "This is the first piece of US manufacturing data conducted since the Covid-19 crisis began. The survey forms are sent out on the first working day of the month, by which point stocks had already fallen by more than 14% from their peak.

"The consensus, therefore, always looked absurdly optimistic. The headline drop is reflected in sharp falls in orders and shipments; the employment index dipped by a more modest 8.1 points, but it will fall further over the next couple of months."

Shepherdson said the Empire State index has substantially over-predicted the national ISM since the trade war intensified last spring, because manufacturers in NY state are less reliant on China trade than firms on the west coast.

"But the virus hit is so broad and deep that lower sensitivity to China is no protection now. We hope the Empire State and ISM numbers will now move back into line, because that implies the latter will dip only to 46 or so in March. But if the recent gap between them persists, the ISM will plummet to just 40 or so, meltdown territory - the post-2008 crash low was 34.5. - and there’s no guarantee that will be the bottom."