The New York Federal Reserve Bank observed little change in March from the progress reported in February. The Empire State Manufacturing Survey’s composite index of general business activity declined slightly from 10.0 to 9.2, but the larger story is that the gains made last month appear to have held up. After contracting for six straight months, the composite index has been positive for two, suggesting modest growth overall and a good sign that the economic environment has stabilized.

With that said, the pace of growth for orders and many other key components eased somewhat this month. The new orders index dropped from 13.3 to 8.2, with just over 47 percent suggesting that sales levels were unchanged from the month before. Similar findings were noted for shipments.

Employment growth remains sluggish, with the index decreasing from 8.1 to 3.2. Just 16.1 percent of respondents said that they had hired new workers in March, with 71 percent indicating no changes. The average employee workweek was unchanged on net.

Looking ahead six months, manufacturers in the New York Fed District remain more upbeat, with a slight pickup in optimism. The forward-looking composite index rose from 33.0 to 36.4, with higher measures for sales, shipments, employment, and capital investment rose. Inventories are anticipated to decline; whereas, pricing pressures are predicted to accelerate. Over half of those surveyed expect for raw material costs to rise in the months ahead.

Here is the summary for this week’s economic report:

After some improvements in late 2012, industrial production declined in January. Manufacturing activity fell 0.4 percent, according to the Federal Reserve Board, with reduced production in motor vehicles pushing the index lower. Year-over-year, manufacturing production was up just 1.7 percent, well below the 6.3 percent pace of January 2011 or the 5.2 percent pace of January 2012. As noted by NAM President and CEO Jay Timmons in his speech before the Detroit Economic Club, the United States can do better. One of our goals should be to strive for 4.5 percent growth in industrial production annually on average between now and 2020—part of what he calls a “20/20 vision.” With faster industrial activity, manufacturers can once again provide return to an outsized role for output and employment growth, reminiscent of what we saw coming out of the Great Recession.

Many other economic data released last week were mixed. In contrast to the industrial production figures, the Empire State Manufacturing Survey showed improvements in activity in January. This was the first non-contracting month for the New York Federal Reserve Bank’s District since July, led by improved sales and increased expectations. Even with these gains, progress in the composite index stemmed mostly from people shifting their views from negative to neutral, hinting that many respondents remain tentative. This is true even though manufacturers are more cautiously optimistic for higher levels of orders, shipments, employment and capital investment over the next six months. Meanwhile, retail sales figures, while increasing 0.1 percent in January, were at their slowest pace since October. Once again, reduced auto sales helped to drag the figure lower, with higher payroll taxes also contributing.

Consumers and small businesses were slightly more upbeat in the most recent sentiment surveys, and yet, they continue to highlight persistent concerns. The National Federation of Independent Business’s (NFIB) Small Business Optimism Index, for instance, found that owners remain worried about the economy and frustrated with the political environment. The index, while edging higher in January, has not recovered from November’s steep decline, and small business owners continue to cite sluggish levels of sales, earnings, hiring and capital investment. Consumers, meanwhile, were more confident in the latest University of Michigan survey, which has fallen of late on fiscal cliff worries and higher payroll taxes. Even with this month’s improvements, consumer sentiment remains subpar.

This week, the economic focus will turn to housing and inflation. New residential construction soared to 954,000 in December, capping a year that saw tremendous gains in housing activity and showing that the still-struggling sector has begun to move in the right direction. The January housing starts figures are expected to show a slight pullback, but the longer-term trend should be for residential starts and permits to move upward. In addition to housing, we will also get new data on consumer and producer prices, both of which have eased over the course of the past year, mainly on lower energy costs. While there has been a pickup in some prices in January, I would expect for the trend of modest inflationary pressures to continue. Core inflation was 2 percent in December, which was in-line with Federal Reserve Board targets.

Chad Moutray is the chief economist, National Association of Manufacturers.

The New York Federal Reserve Bank’s Empire State Manufacturing Survey reported contracting levels of activity for five straight months. The composite index declined from -5.2 in November to -8.1 in December. Almost 62 percent of respondents said that conditions in December were unchanged from the prior month, with 23.2 percent suggesting that it was worse.

Slowdowns from Hurricane Sandy were a large factor in the weak economic data in November, but it is clear that the manufacturing sector has had a rough second half of 2012 – both before and after the effects of the storm. Uncertainties related to the fiscal cliff, as well as worries about slowing sales, have had an impact.

New orders declined on average in December, down from 3.1 to -3.7. The percentage of manufacturing reporting higher sales for the month dropped from 29.1 percent to 19.1 percent, leading to the drop in the index into contraction territory. Shipment levels remain positive, but at a slower pace of growth (down from 14.6 to 8.8). With reduced sentiment and weaker orders and shipments data, businesses have pulled back on hiring. The index for employment was -9.7, with the average employee workweek at -10.8.

Despite these findings, manufacturers in the New York district were more upbeat about the next six months. The forward-looking general business conditions index rose from 12.9 to 18.7. Nearly 52 percent of firms anticipate increased sales in the coming months, with just 19.4 percent expecting reduced orders. This outlook suggests higher levels of shipments, hiring, and capital spending, with each up modestly. (continue reading…)

The Federal Reserve Bank of New York reported that overall business conditions in its District remain weak, despite a slight gain this month. The index of general business conditions rose from -10.4 in September to -6.2 in October, with negative values indicating contracting activity.

While nearly one-quarter of respondents said that conditions were improving, almost 31 percent of them said the opposite. This was the third consecutive month that this index has declined.

Slowing new orders helped to slow overall activity, with sales in negative territory for four straight months. The new orders index went from -14.0 to -9.0 for the month. Other contracting measures included shipments, inventories, and employment.

The forward-looking measures suggest that manufacturers in New York expect positive growth in sales, shipments, and capital spending over the next six months. With that said, each of these indicators has pulled back a little in October, reflecting some diminished optimism. Employment is now not expected to grow in the months ahead, with the index for number of workers down from 8.5 to 0.

Overall, this is one more sign that that manufacturing economy remains soft at best. The Empire State Manufacturing Survey’s findings are consistent with other indicators, with weaker sales and economic uncertainties hampering growth.  

Chad Moutray is chief economist, National Association of Manufacturers.

The New York Federal Reserve Bank’s Empire State Manufacturing Survey reported deterioration in manufacturing activity in September. The composite index of general business conditions fell from -5.9 in August to -10.4 in September.

This was the second consecutive month of contracting activity, with lower levels of new orders leading the index lower. The percentage of respondents saying that their new sales were rising dropped from 25.8 percent to 18.2 percent, with nearly one-third of them suggesting lower sales in both months.

The result was only modest growth in shipments and employment, with the average workweek shrinking on net. Roughly two-thirds of manufacturers in the region say that their employment levels have remained the same, but the index for employment dropped from 16.5 to 4.3 on less job hiring and increased reductions. There were also increased pricing pressures, as almost one-quarter of manufacturers cited higher raw material prices. This is consistent with the producer price data which came out last week.

Despite the more downbeat assessment of the current economic environment, manufacturers were more upbeat when discussing the next six months. The forward-looking general business conditions index jumped from 15.2 to 27.2. The difference between the two months can be explained by fewer respondents expecting conditions to worsen. Expected new orders also help to explain the increase, with anticipated new orders up from 2.4 to 17.0. Shipments, employment, and technology spending were all higher, with capital spending plans virtually unchanged.

Chad Moutray is chief economist, National Association of Manufacturers.

The Federal Reserve Board reported that industrial production increased 0.6 percent in July. This was slightly higher than expected and above the 0.1 percent gains experienced in both May and June. Capacity utilization was also higher, rising from 78.9 percent to 79.3 percent.

Manufacturing production increased 0.5 percent in July, matching the similar increase in June. Year-to-date, manufacturers have produced 5 percent more. In July, the durable goods sector was once again the dominant driver of growth, up 0.8 percent, with nondurable goods production flat for the month. Manufacturing capacity utilization increased from 77.6 percent to 77.8 percent.

The largest gains in manufacturing production came from the motor vehicles (up 3.3 percent), aerospace (up 1.6 percent), computers and electronic products (up 1.5 percent), primary metals (up 1.1 percent), and miscellaneous durable goods (up 1.2 percent) sectors. These were counterbalanced by declines in machinery (down 1.9 percent), wood products (down 1.8 percent), and textile and product mills (down 1.5 percent), among others. Overall, of the 19 major sectors, seven of them experienced declines. (continue reading…)

The New York Federal Reserve Bank’s Empire State Manufacturing Survey reported a slight improvement in overall business conditions in July. The composite index of general business conditions rose from 2.3 in June to 7.4 in July. This suggests a pickup in manufacturers’ sentiment, mirroring an increase in shipments.

New orders declined, with the index dropping from 2.2 to -2.7. Twenty-nine percent of respondents said that their orders were falling, which is similar to the reading last month. The shift was mainly due to fewer of them saying that their new sales had fallen. The concern here is that new orders can be a proxy for future activity; hence, a decline in new orders is not a positive sign. Concerns about sales to Europe and Asia, as seen in some special questions, help to explain some of the mixed emotions that respondents are having regarding the economy.

The pace of employment, notably, increased in July, with the index rising from 12.4 to 18.5. This corresponded to the percentage of respondents saying that their employment was falling declined from 12.4 percent to 6.2 percent. About one-quarter of them said that the number of workers was rising, which was unchanged from June. Meanwhile, the average workweek was flat.

To the extent that net employment is rising (or at least not falling) in the region, this is a testament to continued cautious optimism moving forward. Manufacturers were slightly less positive about the next six months, but remain optimistic overall. The forward-looking general business conditions index fell from 23.1 to 20.2.  The expansion of new orders, employment, and capital spending also slowed. The pace of shipments and capital spending ticked up a bit.

Chad Moutray is chief economist, National Association of Manufacturers.

Several reports released today indicate economic conditions have improved over the course of the last month. In addition to news that producer prices have eased, mostly on lower energy costs, we also learned that manufacturing activity in the New York region “held steady,” as opposed to contracting as it had for the previous five months, and retail sales grew faster than expected.

First, general business conditions rose from -8.5 in October to +0.6 in the Empire State Manufacturing Index produced by the Federal Reserve Bank of New York. Looking beyond the headline number the report was mixed. The index for shipments rose from 5.3 to 9.4, indicating an increase in the pace of growth, but in other areas there remain some weaknesses. For instance, measures for new orders, unfilled orders, inventories and employment were negative. The new orders figure shifted from +0.16 to -2.07.

In essence, the “improvement” seen in these numbers is mostly that conditions did not worsen. One element which factors into these figures is the situation in Europe. Exports to Europe are a significant portion of the state’s exports – about one-third – which is putting a major dent in the region’s production and sales.

With that said, respondents to this survey were overwhelming positive when it comes to predicting manufacturing activity over the next six months. The forward-looking general business conditions index jumped from 6.7 in October to 39.0 in November – its highest level since May. Measures for new orders, shipments, employment and capital expenditures were strong, suggesting that manufacturers expect for overall manufacturing activity to improve significantly in 2012. (continue reading…)

The Federal Reserve reported that industrial production was up 0.2 percent in August, its fourth straight month of positive growth. Since August 2010, industrial production has risen 3.4 percent. Likewise, manufacturing production rose 0.5 percent in August and 3.8 percent for the year. Manufacturers’ capacity utilization also edged 0.4 percent higher in August.

Production at the sector level was more mixed, with 10 sectors experiencing gains in production and 9 having declines. Durable goods sectors had the strongest increases and were up 0.4 percent for the month; nondurables rose 0.1 percent.

The sectors with the greatest increases include: aerospace and miscellaneous transportation (up 2.2 percent), motor vehicles and parts (up 1.7 percent), computer and electronic products (up 1.3 percent), primary metals (up 1.2 percent) and furniture and related products (up 1.2 percent). The largest declines were in textile and product mills (down 1 percent), printing and support (down 0.9 percent) and wood products (down 0.8 percent).

This report shows that manufacturing production continues to rise, led by strong growth once again in the transportation sectors. A rebound in motor vehicle sales and production from the supply chain issues of the spring and strong aerospace numbers significantly added to rising production. The overall industrial production figure was weighed down by weakness in the utility sector, which fell 3 percent in August, reversing the 2.8 percent increase last month. Mining production continues to increase, up 1.2 percent, its sixth consecutive month of gains.

Once again the positive official numbers from the Federal Reserve Board differ from the sentiment surveys conducted by its regional banks. The Empire State Manufacturing Survey from the Federal Reserve Bank of New York, for instance, shows that manufacturing activity continues to contract in the state, with its index of general business conditions falling from -7.7 in August to -8.8 in September. This index had been 21.7 in April, illustrating its decline in recent months; the September figure represented the fourth consecutive month of declining activity. (continue reading…)

From the Federal Reserve Bank of New York, its monthly Empire State Manufacturing Survey:

The Empire State Manufacturing Survey indicates that conditions for New York manufacturers improved at an accelerated pace in April. The general business conditions index rose for a fifth consecutive month, reaching 21.7, its highest level in a year. The new orders index jumped 17 points, to 22.3, and the shipments index shot up 27 points to 28.3. The indexes for both prices paid and prices received rose to their highest levels in more than a year, indicating that price increases continued to accelerate. The index for number of employees climbed to 23.1, while the average workweek index edged down to 10.3. Future indexes continued to convey great optimism about the six-month outlook, and the capital spending and technology spending indexes were noticeably higher.

Continuing problems: cost of employee benefits, government regulation and taxes, and increasingly, finding qualified workers.

Coverage…

• MarketWatch, “New York manufacturing gauge best in a year”
• Wall Street Journal, “NY Fed April Manufacturing Index Unexpectedly Rises To 21.70″
• Bloomberg, “Manufacturing in New York Area Grew in April at Faster Pace”
• Buffalo Business First, “Another solid month for NY manufacturing”