Awkward imbalances are smoothing out this month for Empire State's manufacturing sample. The headline came in at 20.1 which tops Econoday's high estimate while the 6-month outlook, which plunged precipitously in April in initial reaction to import tariffs and talk of trade war, improved noticeably.
New orders have been very strong in this report and picked up the pace in May's report with a 7-point gain to 16.0. Unfilled orders did pile up a bit but, at 5.0, only at a modest pace which is good news for this sample considering signs that capacity is being stretched. But the news here is also good with problems in delivery times growing less severe and growth in the workweek, at 11.1, slowing nearly 7 points. Employment continues to grow but at 8.7 the pace appears sustainable.
The 6-month outlook rebounded nearly 13 points to 31.1 and, though it still remains 13 points below March, the gain suggests that the sample is adjusting to tariff disruptions, whether immediate or in their assessment of longer term effects. The factory sector was a main driver of the economy going into March's tariffs on steel and aluminum and this leadership, based at least on this report, seems to remain in place. Watch Thursday for Philly Fed's report on May.