The Empire State Manufacturing Survey continued to reflect sharp contractions in activity for the second straight month. The composite index of general business conditions was -14.7 in September, only marginally better than the -14.9 seen in August. Each were the lowest levels since April 2009, and they reflect persistent softness in the sector in the New York Federal Reserve Bank’s district. Indeed, the underlying data were negative across-the-board, even with some easing in a few measures in the rate of decline. This included new orders (up from -15.7 to -12.9) and shipments (up from -13.8 to -8.0), with more than one-third of respondents citing declining demand for the month.
The labor market was also weaker. Hiring (down from 1.8 to -6.2) shifted from a slight positive in August to declining in September, with two-thirds of those completing the survey saying that their employment levels were unchanged and 19.6 percent citing fewer employees. The average workweek (down from 1.8 to -10.3) also narrowed significantly.
With that said, manufacturers in the New York Fed region continue to be mostly optimistic about the coming months, albeit with some substantial easing in sentiment in recent months. In the latest survey, 39.0 percent expect to see higher sales in the next six months, 42.9 percent anticipate increased shipments, and 23.7 percent foresee more hiring and capital spending. That should provide some cautious encouragement for the future, even if each of these indicators has decelerated this month. Moreover, there are also some signs of continuing challenges, with the average workweek and inventories both expected to decline moving forward and technology spending slowing to a near-crawl.
Chad Moutray is the chief economist, National Association of Manufacturers.