Manufacturing shows strength –

The dollar decline is starting to have a positive impact on manufacturing. The Empire State Manufacturing Survey showed a strong surge today reached levels we have not seen since 2004. See http://www.newyorkfed.org/survey/empire/empiresurvey_overview.html.

This was a good news surprise for the economy. While the survey does not go into enough detail to determine whether this is coming from international trade, trade changes will have a strong effect on manufacturing. This survey data matches what has been seen in the real export side of the economy. Exports have been surging while imports have been languishing. Exports are posting strong growth relative to their moving averages while imports have been almost flat. Part of the decline in imports is due to the slower growth in the US.

This economic story is consistent with the weak dollar and strong economic growth outside the US. The exports numbers are still relatively small versus all of the value-added from residential housing over the last few years, but this shift in economic growth is real and starting to support the overall economy.