The New York Federal Reserve Bank noted modest gains in manufacturing activity in July, building on improved perceptions in June. The Empire State Manufacturing Survey’s composite index edged marginally higher from 7.8 to 9.5, with 30.0 percent suggesting that general business conditions had improved in the past month. At the same time, nearly half of respondents said that conditions had stayed the same. This data suggest that production in the New York Fed’s district has improved in the past two months, particularly as activity had decelerated from February to May, when it registered a slight contraction.
June’s gains had been in sentiment, but most of the key subcomponents were still negative on net. This month, many of these indicators turned somewhat positive. For instance, the index for new orders rose from -6.7 in June to 3.8 in July. The percentage of those taking the survey who said that their sales had increased from 23.2 percent to 28.9 percent, with 46.0 percent suggesting that new order levels were unchanged. A similar trend was seen for shipments, up from -11.8 to 9.0.
In terms of employment, there were improvements, but also notable weaknesses. The employment index rose from zero in June to 3.3 in July, but 72.8 percent said that their hiring levels were the same. In addition, the average employment workweek remained contractionary, even as its index suggested a slower pace of decline (up from -11.3 to -7.6). Over 15 percent of respondents cited a reduced average workweek this month.
This hesitance to hire was also seen in the forward-looking measures, with 68.5 percent of respondents planning to keep their employment levels unchanged in the next six months. The expected employment index was just 1.1 (down from 1.6), suggesting very small gains in hiring moving ahead. In contrast, many of the other future-oriented indices pointed to more optimism in the second half of 2013, with improved perceptions from last month. This includes the view that new orders, shipments, and capital investments should be higher.
Chad Moutray is the chief economist, National Association of Manufacturers.
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