This Morning’s Key Economic Data - Empire State Manufacturing (Nov.) and Advance Retail Sales (Oct)

November 16, 2009 – This morning’s key economic data included the Empire State Manufacturing Index and Advance Monthly Sales for Retail Trade and Food Services. The Empire State Index came in slightly worse than expected, while the retail trade data came in line with expectations, driven by the auto sector. The advance retail sales data showed a 1.4% increase in October from the previous month, helped by the 8.3% increase in autos. Excluding autos and motor vehicles, the increase was 0.2%.

Excerpts from Press Releases

ADVANCE MONTHLY SALES FOR RETAIL TRADE AND FOOD SERVICES - OCTOBER 2009

The U.S. Census Bureau announced today that advance estimates of U.S. retail and food services sales for October, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $347.5 billion, an increase of 1.4 percent (±0.5%) from the previous month, but 1.7 percent (±0.5%) below October 2008. Total sales for the August through October 2009 period were up 1.5 percent (±0.3%) from the same period a year ago. The August to September 2009 percent change was revised from -1.5 percent (±0.5%) to -2.3 percent (±0.3%).

Retail trade sales were up 1.4 percent (±0.7%) from September 2009, but 2.1 percent (±0.5%) below last year. Gasoline stations sales were down 15.0 percent (±1.3%) from October 2008 and building material and garden equipment and supplies dealers were down 15.0 percent (±1.8%) from last year.

Empire State Manufacturing Survey for November

The Empire State Manufacturing Survey indicates that conditions for New York manufacturers improved in November, but at a somewhat slower pace than in October. The general business conditions index fell 11 points, to 23.5. The indexes for new orders and shipments posted similar declines. Pricing pressures eased, with the prices paid index positive but lower than last month and the prices received index rising to a level just below zero. Employment indexes fell from October’s elevated levels, remaining slightly positive. Future indexes conveyed an expectation that activity and employment would improve in the months ahead and that both input and selling prices would increase significantly.

Conditions Improve at a Moderated Pace

The general business conditions index remained positive for a fourth consecutive month, although it dropped 11 points, to 23.5, from October’s relatively strong level. Forty-three percent of respondents indicated that conditions had improved, while 19 percent reported that conditions had deteriorated. The new orders and shipments indexes both posted similar declines. The new orders index fell from 30.8 to 16.7, and the shipments index declined from 35.1 to 13.0. After turning positive in October, the unfilled orders index drifted back below zero, ending at -2.6. The delivery time index also fell below zero, to -2.6. The inventories index remained near last month’s level, at -17.1.

Pricing Pressures Ease

Survey respondents faced less pricing pressure in November; input prices continued to rise and selling prices continued to fall, but the pace of price changes eased. The prices paid index posted its first decline in several months, falling 9 points to 10.5—a sign that the pace of price increases was slower in November than in October. The prices received index rose 3 points to -2.6, its highest level in a year, suggesting that selling prices fell at the slowest monthly pace in many months. Employment indexes increased significantly in October but gave up much of their gains in November, with both indexes remaining close to zero. The index for number of employees fell 9 points to 1.3, and the average workweek index fell 16 points to 5.3.

Manufacturers Expect Activity to Improve and Prices to Climb

The six-month outlook remained optimistic, with an expectation that business activity, inventories, and employment would rise in the months ahead. The future general business conditions index rose to 57.0, its highest level in several years. The future new orders index held steady at 52.4, but the future shipments index dipped to 48.9. The future inventories index climbed 13 points to 7.9, its first positive reading in more than a year, suggesting that some degree of inventory rebuilding is expected in the near future. Forward-looking price indexes rose sharply: the index for future prices paid climbed 24 points, to 48.7, and the index for future prices received rose 17 points, to 27.6. The index for future number of employees climbed to 30.8, while the future average workweek index held steady at 18.4. The measure for planned capital expenditures rose to 21.1, and the measure for planned technology spending rose to 14.5.