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Analysts at Nomura explained that the Empire State manufacturing survey headline index fell sharply by 6.6pp to 19.0 in September, below expectations (Nomura: 22.0, Consensus: 23.0), pointing to a slower pace of business expansion than in August.  

Key Quotes:

“While the headline index remains elevated, the moderation in September indicates some pullback from highly elevated readings in previous months. The new orders index declined modestly by 0.6pp to 16.5, and the shipment index fell sharply by 11.4pp to 14.3, indicating slower growth in activity.  

However, strong labor-related indicators appear contrary to slowdown in production-related measures. Employment indicators improved overall with the number of employees index holding steady at 13.3 and the average employee workweek index improving modestly by 2.6pp to 11.5. Elsewhere, the prices paid index held steady at 46.3, and the prices received index came in at 16.3, down 3.7pp from the August estimate. Elevated readings in these price measures point to continued increases in selling and input prices.

The respondents generally remained optimistic about the six-month ahead outlook in September, but to a lesser degree than in August. The six-month ahead business conditions index declined 4.5pp to 30.3. The six-month ahead capital expenditure index declined 7.2pp to 19.5, implying pullback in business investment plans. While trade uncertainties remain heightened, business optimism has remained resilient so far. The September issue of the Philly Fed survey on Thursday should provide us with more information on manufacturing sector sentiment.”

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