The New York Federal Reserve Bank’s Empire State Manufacturing Survey reported deterioration in manufacturing activity in September. The composite index of general business conditions fell from -5.9 in August to -10.4 in September.
This was the second consecutive month of contracting activity, with lower levels of new orders leading the index lower. The percentage of respondents saying that their new sales were rising dropped from 25.8 percent to 18.2 percent, with nearly one-third of them suggesting lower sales in both months.
The result was only modest growth in shipments and employment, with the average workweek shrinking on net. Roughly two-thirds of manufacturers in the region say that their employment levels have remained the same, but the index for employment dropped from 16.5 to 4.3 on less job hiring and increased reductions. There were also increased pricing pressures, as almost one-quarter of manufacturers cited higher raw material prices. This is consistent with the producer price data which came out last week.
Despite the more downbeat assessment of the current economic environment, manufacturers were more upbeat when discussing the next six months. The forward-looking general business conditions index jumped from 15.2 to 27.2. The difference between the two months can be explained by fewer respondents expecting conditions to worsen. Expected new orders also help to explain the increase, with anticipated new orders up from 2.4 to 17.0. Shipments, employment, and technology spending were all higher, with capital spending plans virtually unchanged.
Chad Moutray is chief economist, National Association of Manufacturers.