The Empire State Manufacturing Survey, released this morning by the New York Federal Reserve Bank, shows manufacturers contracting their output for the third straight month. The index of general business conditions fell from -3.8 to -7.7. Measures for new orders, unfilled orders and inventories worsened for the month.
There were marginal, and positive, improvements for shipments and employment. Moreover, pricing pressures continue to ease, but remain highly elevated, with the index for prices paid decreasing from 43.3 to 28.3.
Manufacturers in New York remain positive about the next six months, but their levels of optimism have diminished significantly over the past few months. Showing the depth of this decline, the index for expected general conditions was 59.0 in January; it is now 8.7 in August, after falling from 32.2 in July. Indices for new orders, shipments, the number of employees, capital expenditures and technology spending all fell, but remained positive.
Respondents, however, see the number of unfilled orders and delivery time contracting over the next six months, with inventories gaining. Pricing pressures are expected to remain elevated.
In a series of special questions, the survey asked about manufacturers’ ability to find skilled workers. Employees with advanced computer skills were among the most difficult to hire, according to the respondents. This was followed by the difficulty in finding workers who were punctual and had strong interpersonal skills. On average, businesses spent 6.5 percent of their total compensation on training last year, and these firms are expecting the typical workers’ wage and salary to rise by 2.4 percent over the next 12 months.
Chad Moutray is chief economist, National Association of Manufacturers.