US Empire State manufacturing index remains weak in October

The Empire State manufacturing index was nearly unchanged at -11.4 in October, as the indicator of New York state manufacturing sentiment only bounced back modestly from two months of sharply negative readings (August -14.9 and September -14.7).

However, despite the improvement in the headline number boosted by slowing inventory accumulation, the underlying data appear to have deteriorated substantially.  New orders (-18.9, previous: -12.9) and shipments (-13.6, previous: -8.0) continue to point to slowing output and demand for manufacturing through the end of Q3. Additionally, the employment index (-8.5, previous: -6.2) slid to a three-year low.

These data suggest regional manufacturing continued to slow sharply and is likely to face further headwinds in the months ahead from a strong dollar. However, given the relatively small size of the manufacturing base in New York state, we place limited weight on this morning's release.

"Broader measures of manufacturing activity continue to show a rosier picture of the sector.  Although the ISM manufacturing index has deteriorated somewhat, it remains in positive territory and the nonmanufacturing index remains robust", noted Barclays.