Manufacturing activity in the New York Federal Reserve Bank’s district eased somewhat in January but remained strong overall. In the latest Empire State Manufacturing Survey, the composite index of general business conditions declined from 19.6 in December to 17.7 in January. (Note that these figures reflect a new seasonal adjustment update for all past data points.) While this was the third straight deceleration in the headline index, off from the three-year high of 28.1 in October, the pace of expansion has remained robust, averaging 20.6 over the past eight months.
The underlying indicators reflected slower, but still encouraging, growth. This included continuing solid growth for new orders (down from 19.0 to 11.9) and shipments (down from 23.5 to 14.4), but much softer expansions in the labor market variables of employment (down from 22.9 to 3.8) and the average workweek (down from 9.3 to 0.8). On the downside, prices for raw materials (up from 29.7 to 36.2) accelerated once again to an 11-month high, with nearly 40 percent of respondents saying that input costs were higher in January.
Nonetheless, manufacturers in the New York region remained very upbeat about the next six month, much as they have for the past year. The expectations composite index rose from 46.3 to 48.6. This was not far from November’s pace of 49.8, which was the best reading since January 2012. In all, 61.5 percent of those completing the survey felt that expected business conditions were better this month, with 12.9 percent suggesting that they were not.
The various indices of activity for the next six months were higher across the board, including new orders (up from 42.7 to 47.6), shipments (up from 43.2 to 46.3), hiring (up from 24.0 to 26.9), the average workweek (up from 6.5 to 16.7), prices paid (up from 50.0 to 52.9), capital expenditures (up from 34.1 to 34.8) and technology spending (up from 22.5 to 27.5). Reflecting the uptick in inflationary pressures, the prices paid index was at a level not seen since May 2012.