NY Fed manufacturing index drops sharply in May

A widely-followed measure of manufacturing conditions Stateside registered an unexpected slide in May.

The Federal Reserve bank of New York so-called ‘Empire State’ manufacturing sector index dropped from a reading of 9.56 to -9.02.

Analysts had pencilled in a reading of 6.50.

A sub-index for new orders fell sharply from a reading of 11.14 for April to -5.54 in May.

Another gauge linked to firms’ staffing levels edged higher from a reading of 1.92 to 2.08, while the sub-index tracking the average length of employee’s workweek fell from 1.92 to -8.33.

The Empire State survey is one of the three barometers of manufacturing sector conditions which traders tune into each month, alongside the Philly Fed index and the ISM survey which canvasses purchasing managers nation-wide.

Nevertheless, it is the least important of the three.

"The weighted sum of the Empire State components, mimicking the structure of the ISM, points to a headline ISM of about 51, little changed from the actual April reading, 50.8. Overall, then, the weak-looking Empire State headline index does not change our view that last year's deterioration in manufacturing is over, but that a real recovery has not yet begun," Ian Shepherdson, chief economist at Pantheon Macroeconomics said in a research note sent to clients.

"New York area manufacturing continues to struggle but conditions have improved notably from the beginning of the year Thursday’s reading from the Philly Fed index should provide an indication if the same is true for a broader swath of the US manufacturing base," Barclays's Jesse Hurwitz pointed out.