A Giant Sucking Sound Lurking Beneath the Empire Index?

The Empire State manufacturing economic index fell in June, but a closer look reveals that the majority of Monday's headlines over-extenuated the negative implications of that reading.

In fact an examination of the underlying commentary in the report reveals that manufacturing leaders have now turned much more optimistic about their futures. The index measuring their outlook rose to 47.8, the highest reading since July 2007.

In the report, the New York Fed reports that new factory order measures also increased. The index used to measure employment health also increased.

Unlike other manufacturing reports the overall survey number is not a composite of the other underlying measures. Such a decoupling of measurements suggests that their may be other factors in play beyond the overall general index reading.

John Ryding, chief economist at RDQ Economics, wrote to his clients on Monday, "The details of the report were not as weak as the headline." Several large, noteworthy New York firms illustrate Ryding's assertion.

New York-based IBM (IBM) continues to maintain it is "ahead of pace" to meet its 2010 earnings forecast.

And Empire based, Alcoa (AA) recently claims that is distributors of aluminum are showing increased buying interest. In fact, Alcoa CEO Klaus Kleinfeld reports that distribution channels are now speculating that they will be unable to adequately supply a revived global demand.

Distributors "know if the green shoots turn over to become demand, they will not be able to supply." If that happens Kleinfeld says, Our "distribution chain will generate this giant sucking sound of demand."

It would not be the first time we've seen aluminum's silver lining.