NY Fed: Manufacturing Activity Has Contracted in 8 of the Past 9 Months

The Empire State Manufacturing Survey has reflected contracting activity in eight of the past nine months. The composite index of general business conditions improved somewhat from -19.4 in January to -16.6 in February, but this data continues to indicate net decreases for the region’s manufacturers. The pace of the decline eased for a number of measures, albeit with still-strong decreases in activity. This includes new orders (up from -23.5 to -11.6), shipments (up from -14.4 to -11.6) and the average workweek (up from -6.0 to -5.9). On the other hand, employment (up from -13.0 to -1.0) has mostly stabilized, even as it remains slightly negative.

Overall, this report shows just how challenged the manufacturing sector is right now for business leaders in the New York Federal Reserve Bank’s district. The strong dollar and global economic weaknesses have weighed heavily on demand and production. Indeed, 34.1 percent of respondents said that new orders fell for their firms in February, with 22.5 percent noting increases. Nonetheless, this represented some progress from the January release, where 46.1 percent observed declines in new orders.

Despite the current headwinds in the marketplace, manufacturers in the New York Fed region were more upbeat about the next six months. The forward-looking composite index jumped from 9.5 to 14.5, with most of the key underlying data higher. This included new orders (up from 12.2 to 22.2), shipments (up from 17.0 to 23.8) and hiring (up from 4.0 to 16.8). Along those lines, 47.6 percent of those completing the survey expect increased new orders in the months ahead, with one-quarter anticipating declines. Capital spending (down from 15.0 to 12.9) and technology spending (down from 9.0 to 5.9) plans remained positive, but eased somewhat for the month.

On the other hand, the average workweek (down from 11.0 to zero) and inventories (unchanged at 1.0) were not expected to change much over the next six months.

Chad Moutray

Chad Moutray

Chad Moutray is chief economist for the National Association of Manufacturers (NAM) and the Director of the Center for Manufacturing Research for The Manufacturing Institute, where he serves as the NAM’s economic forecaster and spokesperson on economic issues. He frequently comments on current economic conditions for manufacturers through professional presentations and media interviews. He has appeared on Bloomberg, CNBC, C-SPAN, Fox Business and Fox News, among other news outlets.
Chad Moutray

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