The New York Fed’s Empire State Manufacturing Survey for December indicated deterioration rather than improvement.

The Federal Reserve Bank of New York released its Empire State Manufacturing Survey for December on Monday.  Although economists had been expecting to see the general business conditions index rise to zero from November’s negative 5.2, the index fell another three points.  Although assessments of current manufacturing activity declined, assessments of future manufacturing activity showed some improvement.  Q4: 2012 U.S. GDP Nowcast Update

This report is based on responses of manufacturers from a variety of industries located in the State of New York to a monthly survey conducted by the New York Fed.  In addition to their responses to questions concerning current conditions, the participants provide their outlook for these conditions during future months.  Although a decline in new orders is often seen as a sign of an approaching recession, this survey has frequently provided false recession signals to those who have anticipated an imminent recession threat from the data.  The new orders index declined 6.8 points in December to negative 3.7.  The index for prices paid by manufacturers rose 1.5 points to 16.13, while the index for prices received by manufactures declined 4.54 points to 1.08.  Empire State Manufacturing Surprises to the Downside

From the report:

The December 2012 Empire State Manufacturing Survey indicates that conditions for New York manufacturers continued to decline at a modest pace.  The general business conditions index was negative for a fifth consecutive month, falling three points to -8.1.  The new orders index dropped to -3.7, while the shipments index declined six points to 8.8. At 16.1, the prices paid index indicated that input prices continued to rise at a moderate pace, while the prices received index fell five points to 1.1, suggesting that selling prices were flat.  Employment indexes pointed to weaker labor market conditions, with the indexes for both number of employees and the average workweek registering values below zero for a second consecutive month. Indexes for the six-month outlook were generally higher than last month, although the level of optimism remained at a level well below that seen earlier this year.

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The index for number of employees rose five points to -9.7, while the average workweek index declined three points to -10.8.

The major ETFs expected to respond to the Empire State Manufacturing Survey for December are:

Industrial Select Sector SPDR ETF (NYSEARCA:XLI)  +0.90%

Materials Select Sector SPDR ETF (NYSEARCA:XLB) +1.01%

iShares Dow Jones US Industrial Sector Index Fund (NYSEARCA:IYJ)  +0.95%

Consumer Staples Select Sector SPDR Fund ETF (NYSEARCA:XLP)  +0.19%

iShares Dow Jones US Financial ETF (NYSEARCA:IYF) +1.78%  Learn More About iShares ETFs

Bottom line:  The New York Fed’s Empire State Manufacturing Survey for December indicated a continuing decline in conditions for manufacturers.  Although the near-term outlook for the next six months showed improvement, the degree of optimism was below last year’s level.  

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About John Nyaradi (http://www.wallstreetsectorselector.com) John Nyaradi is Publisher of Wall Street Sector Selector: Your Home For ETF Investing! John writes a weekly guest column, John Nyaradi’s ETF Edge for MarketWatch.com and his investment articles have appeared in many online publications including Trading Markets, Money Show, Yahoo Finance, Investors Insight, Fidelity, ETF Daily News, iStock Analyst , among many others. His book, Super Sectors: How to Outsmart the Market Using Sector Rotation and ETFs, is published by John Wiley and Sons and included among the Years Top Investment Books in the 2011 Stock Trader’s Almanac.