The latest reading on Empire State manufacturing took a decided turn lower today as the gauge sank to a 19-month low. This key data point is yet another potential symptom of a slowing economy.
The manufacturing index declined 12.4 points to 10.9 in December, according to marketwatch.com. Consensus estimates were looking for a reading of 21. Weakness was seen across the board in today’s report, including large declines in both shipping and new orders.
The regional reading on activity is the first of several due for release this week. Although these indexes can demonstrate some volatility on a month-to-month basis, weakness seen in several regions could potentially point to significant economic slowing. Several factors could be behind the poor reading, although some analysts have suggested that the ongoing trade war with China and a stronger dollar index have been the primary culprits.
The Federal Reserve is set to meet on Tuesday and Wednesday this week, with the central bank’s decision on interest rates being announced on Wednesday. It is widely expected that the Fed will follow-through on another 25-basis point hike this week. Expectations going forward, however, have seen a dramatic shift in recent weeks following some dovish commentary from Fed chief Jerome Powell. Traders had been pricing in another three rate hikes next year, although current expectations are pricing in only a single hike.
A string of disappointing data like today’s weak manufacturing figures could potentially give the Fed further reason for pause.
The gold market is moving slightly higher as there is some increasing risk aversion in the marketplace today. Gold is currently up almost $9 per-ounce at $1245.66 and is once again approaching key resistance at the October highs around $1252. The market could see some increasing volatility going into Wednesday’s Fed announcement, and a heavy slate of economic data set for release could also add to price swings.