The headline, at 6.5 in January, is respectable but some of the details in the Empire State report hint at greater strength. Only modestly positive are new orders, at 3.1 and well down from December's 10.4. Shipments, at 7.3, are more positive but also down from December, at 8.6. And employment is still in the negative column at minus 1.7 as is the workweek at minus 4.2.
But positive hints come from inventories which, at a modest looking 2.5, are actually one of the rare builds for this report. This may be indicating that manufacturers in the New York region see greater strength ahead and are getting supplies together. This possibility is supported by the 6-month outlook which held unchanged at 49.7 and still 20 points ahead of the pre-election level.
Prices are another positive, showing significant traction for both inputs, at 36.6 for a roughly 15 point gain, and unusual traction for selling prices, at 17.6 and also up about 15 points.
Empire State is a positive first signal for a factory sector that, due to weak exports and weakness in energy equipment, has been mostly struggling. Watch for the Philly Fed where the January report will be one of Thursday's calendar highlights. Out tomorrow will be industrial production which will offer definitive data on December's factory conditions. Also note that December's levels in today's report have been revised due to year-end adjustments.
January's advance data start with the Empire State report which, like an even stronger Philly Fed report, has been pointing to building momentum for the manufacturing sector. Strength has been led by new orders and also business expectations. Forecasters see the index posting a third straight month in the plus column, at 8.0.