Sentiment edged somewhat higher in March, according to the Empire State Manufacturing Survey from the New York Federal Reserve Bank. The composite index of general business conditions rose from 4.5 in February to 5.6 in March. Nonetheless, overall optimism has taken a hit over the past couple months, mostly due from poor weather conditions, with the index down from 12.5 in January.
Weather wreaked havoc in February, with the new orders index slightly contracting (-0.2). In March, sales shifted to modest gains once again (3.1), which was a good sign. Just over 30 percent of respondents said that their new orders increased in the month, with 27.3 percent noting declines. Shipments (up from 2.1 to 4.0) and the average workweek (up from 3.8 to 4.7) also improved. In addition, pricing pressures for raw materials decelerated a bit (down from 25.0 to 21.2), with 74.1 percent saying that their costs were unchanged in March.
Meanwhile, the pace of hiring slowed somewhat (down from 11.3 to 5.9), but employment growth has been positive for three straight months with mostly modest gains. Still, 68.2 percent of those taking the survey said that hiring was constant for the month.
Looking ahead six months, manufacturers in the New York Fed district continue to be mostly optimistic, albeit less so than last month. Nearly 48 percent of respondents anticipate increased new orders in the coming months, down from 55.0 percent who said the same in February. Similarly upbeat assessments were seen for shipments, with a generally positive outlook for modest growth in both hiring and capital spending. Indeed, these data support the view that the current weaknesses will be temporary, particularly if the more-positive view of future growth comes to fruition.
Chad Moutray is the chief economist, National Association of Manufacturers.