The Federal Reserve Bank of New York reported that manufacturing activity gained momentum this month. The Empire State Manufacturing Survey’s general business conditions index jumped to 13.5 in January from 8.2 in December. This is the highest point since April and represents a turnaround from the June to October time frame, which noted contracting activity.
The news was generally positive across-the-board, with higher new orders, shipments, inventories and employment. Most importantly, manufacturers’ confidence in additional activity over the next six months also improved, with strong levels of growth expected overall. This includes more hiring and capital spending. Pricing pressures are also anticipated to accelerate.
In a series of special questions, 51 percent of respondents intend to increase employment in the coming months. This is an increase from the 41 percent who said the same in June. Stronger sales growth was the main reason cited. In terms of wages and benefits, 54 percent of manufacturers responding to the survey said that wages would increase by less than 2.5 percent this year. On the other hand, 71 percent said that benefit costs would rise by more than 2.5 percent.
Overall, this report is consistent with other regional and national indicators which show the domestic manufacturing sector picking up steam as we enter the new year.
Chad Moutray is Chief Economist, National Association of Manufacturers.