US: Empire State survey point towards manufacturing strength - Nomura

Analysts at Nomura explain that the US Empire State manufacturing survey in May, the first manufacturing survey for the month, indicated that its headline index increased 4.3pp to 20.1, above expectations (Nomura: 14.0, Consensus: 15.0).

Key Quotes

“The strength in the May report was broad-based and indicated steady near-term momentum in the manufacturing sector. The new orders index rebounded 7.0pp to 16.0, indicating steady near-term momentum. The shipments index also improved, suggesting some faster expansion in contemporaneous activity. The prices paid index increased 6.6pp to 54.0, consistent with upstream price pressure in other business surveys. Part of the increase could be reflection rising oil prices as well as some anecdotal evidence on higher steel and aluminum input costs as a result of the recently-enacted tariffs.”

“Forward-looking indicators, which showed a sizable drop last month, reversed much of that weakness, although not completely. At 31.1, the six-month ahead general business conditions index remains 19.4pp below its February 2018 peak of 50.5. Thus, while the near-term outlook improved relative to April, the forward-looking variables suggest that trade concerns could still be exerting downward pressure on manufacturer’s confidence.”