The New York Federal Reserve Bank said that manufacturing activity improved somewhat in December, but it still remained stalled overall. The Empire State Manufacturing Survey’s composite index increased from a slight contraction (-2.2) in November to a slight expansion (1.0) in November. Indeed, overall activity had generally decelerated over the past few months, with the main index down from its recent peak of 9.5 in July.
New orders contracted for the second straight month, with one-quarter of the respondents saying that their sales declined in December. Just over half reported that their new orders were unchanged for the month. Likewise, the average workweek shortened further, with the index down from -5.3 to -10.8. Hiring was unchanged at zero. Overall, 73.5 percent of those completing the survey said that their employment levels had not changed in December.
On the positive side, shipments activity improved, up from -0.5 to 7.7. The percentage of survey-takers with increasing shipments rose from 24.8 percent to 33.4 percent.
Despite the poor current manufacturing figures, business leaders continue to be mostly positive about the next six months, albeit with some easing in sentiment in December. The forward-looking composite index decreased from 37.5 to 35.7. The expected data on new orders, shipments, hiring, and capital spending all declined for the month, but overall, they suggest cautious optimism for the new year. For instance, over 40 percent of respondents anticipate higher sales in the next six months, with only 13.9 percent forecasting them lower.
Hiring is predicted to grow modestly, with 24.1 percent of respondents planning to add to their workforce. Still, over 60 percent plan to make no changes to their employment levels over the next six months. For those who are looking for talent, finding qualified workers appears to be “increasingly difficult.” In a series of special questions, the inability to find qualified workers was cited by 70.4 percent of respondents as a major problem, making it second only to employee benefit costs (85.2 percent). Other top challenges included taxes (66.7 percent), government regulation (61.7 percent), and weak sales (40.7 percent).
Chad Moutray is the chief economist, National Association of Manufacturers.
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