Must-know releases shaping bonds and stocks this week

Must-know releases shaping bonds and stocks this week (Part 1 of 9)

Why March has seen a moderate rise in New York manufacturing

What is the Empire State Manufacturing General Business Conditions Index?

Every month, the Federal Reserve Bank of New York conducts a survey to gauge current and expected activity trends in the New York manufacturing sector. The survey quizzes participants primarily on manufacturing activity, new orders, inventories, hiring activity, and changes in prices paid for purchases and prices received for sales. The index also asks respondents about their views on businesses for the next six months. The survey is sent on the first day of each month to a group of about 200 executives, typically the president or CEO, across a cross-section of industries. The New York Fed then calculates diffusion indexes based on the responses covering all facets of manufacturing. Once a year, mainly in January, the index undergoes a benchmark revision to reflect seasonality.

Empire state manufacturing indexEnlarge Graph

What did latest reading indicate?

There was moderate expansion in New York manufacturing activity, according to the March 2014 survey. The general business conditions index recorded a slight month-over-month increase to 5.6—0.8 above last month’s reading. Of respondents, 30% reported that conditions had improved over the month, while 25% reported that business conditions had worsened. The new orders index climbed to 3.1, an increase of 0.3 over the last month, signaling a slight increase in orders.

The shipments index inched up by 0.2 to 4.0, indicating a small rise in shipments, and the unfilled orders index fell by 1, to -16.5. The delivery time index dropped to -3.5, indicating somewhat shorter delivery times, and the inventories index climbed by 1.2 to 7.1—a sign that inventory levels had risen over the month.

The Price Index contracted, while the Employment Index expanded

The indexes for both prices paid and prices received declined but remained positive, indicating slower price growth. The prices paid index fell 4 points to 21.2, while the prices received index fell 13 points to 2.4.

Labor market conditions continued to improve. The employment index fell 5 points, but at 5.9, it indicated a small increase in employment levels. The average workweek index increased marginally to 4.7, pointing to a small increase in hours worked.

To find out how Empire state manufacturing data impacts the SPDR S&P 500 (SPY) and the Total Bond Market ETF (BND), read on to the next part of the series. SPY offers exposure to the 500 largest U.S. firms, including names like Apple (AAPL), Exxon Mobil (XOM), and General Electric (GE), while BND provides exposure to the U.S. investment-grade bond market.

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