01/17/24 08:33 AM EST

There's No Sugarcoating January's Abysmal Manufacturing Data

Below is a chart and brief excerpt from today’s Market Situation Report written by Tier 1 Alpha. If you’re interested in learning more about the Hedgeye-Tier 1 Alpha partnership, there’s more information here.

We covered Empire manufacturing in yesterday's webcast, but some data releases are so profoundly bad they warrant further discussion. Below the surface, it may not be all doom and gloom, with a few positives to ponder.

As per the latest January survey, manufacturing activity contracted sharply in New York State. The general business conditions index plummeted to -43.7, a nadir last seen in May 2020, after a decline of 29 points following last month's 24-point drop. The new orders and shipments indexes witnessed steep falls, with new orders dropping to -49.4 and shipments to -31.3, indicating a significant reduction in both areas. Unfilled orders were stable yet negative at -24.2, continuing a notable downtrend, while inventories decreased slightly at -7.4, and quicker delivery times were reported at -8.4. That's the bad news. There's no way to sugarcoat it; January manufacturing was abysmal.

Onto the good news, which from a flow's perspective, is what we care about. On the employment front, the workforce numbers remained relatively unchanged at -6.9, and the average workweek index slightly decreased to -6.1, reflecting minor dips in employment and working hours. Input costs saw a marginal rise, with the prices paid index increasing to 23.2. Meanwhile, the prices received index was consistent at 9.5, suggesting that the growth in selling prices was moderate.

In the forward-looking indicators survey, respondents were optimistic for the most part and, more importantly, expect to hire staff and average work hours per employee to climb significantly. If employers were waiting for it to be fashionable to fire staff, this positive outlook would be less likely. With that said, similar "intentions" divergences have occurred prior to recessions in 2001 and 2007. For now, let's assume the girl really does plan to call you...

Ultimately, poor data sets up much easier base effects to compare data. It is easier to accelerate from depressionary levels than the fiscally juiced exuberance of the post-COVID era. A silver lining of sorts.

Learn more about the Market Situation Report written by Tier 1 Alpha.