The New York Federal Reserve Bank said that manufacturing activity expanded in October, but only barely. The Empire State Manufacturing Survey’s composite index declined from 6.3 in September to 1.5 in October. The good news was that manufacturers had reported positive sentiment in eight of the past nine months, even as it suggests that perceptions had decelerated from the summer months. Activity in the region was somewhat diminished by uncertainties surrounding the fiscal shutdown and debt ceiling.
Despite the downtick in optimism, the Empire State’s manufacturers reported an increase in the pace of sales for the month. The index for new orders rose from 2.4 to 7.8, the highest level observed since March. Still, roughly half of the respondents said that new orders and general business conditions were unchanged from the previous month. Moreover, the pace of shipments (down from 16.4 to 13.1) and hiring (down 7.5 to 3.6) both retreated somewhat. Inventory levels were unchanged. Pricing pressures were higher but mostly in-check, with seven out of ten respondents suggesting that raw material costs were flat for them.
Looking ahead six months, manufacturers in the New York Fed region continue to be mostly positive. The forward-looking composite index was essentially unchanged, up from 40.6 to 40.8. Measures of activity were higher across-the-board, including expected increases in new orders, shipments, employment, and capital spending. For instance, 46.5 percent of those taking the survey predict increased new orders over the next six months, with just 9.5 percent forecasting declines. Hiring is predicted to continue being skittish, however, with 80.7 percent of manufacturers planning no changes in employment levels.
Chad Moutray is the chief economist, National Association of Manufacturers.
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