The New York Federal Reserve Bank said that manufacturing activity rebounded in January. The Empire State Manufacturing Survey’s composite index increased from very modest growth in December (2.2) to stronger activity in January (12.5). This data reflects revisions due to new seasonal adjustments. More importantly, the report suggests that the pace of growth in January was the highest since May 2012 – definitely a hopeful sign as we begin the new year.
The better data reflected both sales and shipments strength. For instance, the index for new orders rose from -1.7 in December to 11.0 in January. To help explain this shift, the percentage of respondents saying that their new orders were higher for the month jumped from 24.0 percent to 34.7 percent. Likewise, the shipments index increased from 4.7 to 15.5, with those suggesting that their shipments had fallen decreasing from 26.7 percent to 17.1 percent.
The employment numbers were also improved. In December, the average employee workweek was contracting on net (-10.8), but that expanded to slight gains in January (1.2). On the hiring front, employment moved from being stagnant in December (zero) to decent increases in January (12.2), with over 24 percent of those completing the survey indicating that they had added workers in the month. Still, 63.4 percent of respondents made no changes to employment, suggesting only modest increases overall.
Pricing pressures also accelerated, with the index for raw material costs up sharply from 15.7 to 36.6. The percentage of survey-takers who said that the prices that they paid for inputs were higher in the month rose from 16.8 percent in December to 37.8 percent in January.
Looking ahead six months, manufacturers in the New York Fed’s district remain mostly positive. The forward-oriented measure of new orders increased from 30.2 to 39.1, with over half of all respondents saying that they expect sales to increase in the first half of 2014. The data for shipments, employment, and capital spending growth also indicated an optimistic outlook ahead.
Chad Moutray is the chief economist, National Association of Manufacturers.