Empire State Mfg Index Supports SMU Buyers Sentiment Index
Jul / 16 / 2010 - Empire State Mfg Index Supports SMU Buyers Sentiment Index
SMU compares the New York Fed Manufacturing index to our SMU Buyers Sentiment Index
Written by: Stuart Graves
SMU Sentiment Meter right on target
The Empire State Manufacturing Index was released today and analysts were surprised by the results, Steel Market Update was not.
Each month The New York Fed conducts a survey of manufacturers in New York State. Participants from across the state represent a variety of industries. On the first of each month, the same pool of roughly 175 manufacturing executives (usually the CEO or the president) is sent a questionnaire to report the change in an assortment of indicators from the previous month. Respondents also give their views about the likely direction of these same indicators six months ahead.
SMU conducts our own survey which measures the current attitude of buyers and sellers of flat rolled steel products in North America regarding how they feel about their company's opportunity for growth in today's market. Currently we send invitations to over 700 North American companies to participate in our survey. Our normal response rate is approximately 200 companies. Of those responding approximately 45%-48% are manufacturing companies, 46%- 49% are service centers/distributors and the balance is made up of steel mills, trading companies and toll processors involved in the steel business.
The Empire Manufacturing Index was expected to come down slightly from June’s reading of 19.57, but not nearly to the extent that it did. According to Bloomberg.com the forecast was for an index range of 16 to 20 with a consensus level of approximately 18; the index came in at 5.1. They also state that prior to the announcement that “the overall index is likely to be healthy in July.” Although a reading of 5.1 is still positive it shows that the growth rate is declining rapidly.
Here at Steel Market Update we conduct our survey twice a month in order to grasp how steel buyers and sellers feel about the market. The graph below illustrates Steel Market Update’s Buyer’s Sentiment Meter in conjunction with the Empire State Manufacturing Index. With few exceptions the SMU Sentiment Meter shows to be a good predictor (typically a month or two ahead) of the Empire State Manufacturing Index on market trends.
This is the first time SMU has compared the results of our Buyers Sentiment Meter against the Empire Mfg. Index. We found the correlation to be quite striking. We welcome your opinions.
