The New York Federal Reserve Bank said that manufacturing sentiment decelerated somewhat in September. The good news was that activity has now expanded for four straight months. The Empire State Manufacturing Survey’s composite index edged lower from 8.2 in August to 6.3 in September. Overall, this data suggests that the sector is growing only modestly, with this month’s survey disappointing. The consensus estimate had been for a marginal pickup in activity, not the opposite.
In general, these data show continued slow growth in sales, dampening the overall figures. The index for new orders increased from 0.3 in August (essentially stalled) to 2.4 in September (somewhat modest growth). Over 46 percent of respondents said that their orders had not changed this month, with 28.0 percent saying that their sales were higher. That is only barely higher than the 27.3 percent who reported increased sales in August.
Other data were mixed. Shipments were up strongly in September, with the index rising from 1.5 to 16.4. The shift in this index can largely be explained by fewer respondents saying that their shipments had decreased (down from 29.6 percent to 18.9 percent). On the employment front, hiring (down from 10.8 to 7.5) and the average workweek (down from 4.8 to 1.1) both eased in August. Roughly one-in-five manufacturers completing the New York Fed survey said that they had added workers in the month, with two-thirds having flat employment.
Looking ahead, manufacturers continue to be cautiously optimistic. Almost half of the respondents expect the level of new orders to be higher in the next six months, and the forward-looking composite index rose from 37.4 to 40.6. Despite the higher levels of anticipated activity, the pace of capital expenditures eased slightly, down from 24.1 to 15.1, with 63.4 percent of manufacturers not planning any investment changes and just over one-quarter increasing their investments.
The employment data continue to suggest a high degree of sluggishness. The index for the number of employees six months from now declined from 8.4 to 4.3. Just 21.5 percent planned to add new hires, with 61.3 percent expecting to keep their employment levels flat. Moreover, the expected average workweek measure was contractionary for the fourth straight month (-2.2). Almost three-quarters of respondents anticipate their employees working fewer hours on average. Given the healthy gains in new orders and shipments that are also predicted (combined with limited hiring), this latter points about hours seems a bit out of sync. Nonetheless, it does suggest a bit of tentativeness, even in light of more upbeat sentiment about the coming months.
Chad Moutray is the chief economist, National Association of Manufacturers.
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