Tag: empire state manufacturing survey

Empire State Survey: Manufacturing Activity Picked Up Slightly in March

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.

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Empire State Survey: Manufacturing Activity Eased in February

The New York Federal Reserve Bank said that manufacturing sentiment eased in February, with colder weather likely dampening overall demand and activity. The Empire State Manufacturing Survey’s composite index declined from 12.5 in January to 4.5 in February. Even with the deceleration, manufacturers continue to expand, with the index positive for the 13th straight month.

Nonetheless, both sales and shipments took a hit in February. The index for new orders dropped from 11.0 to -0.2, falling to a slight contraction for the month. The percentage of manufacturers reporting higher sales for the month dropped from 34.7 percent to 26.1 percent, with those noting unchanged levels growing from 41.7 percent to 47.6 percent. Similarly, the shipments index declined from 15.5 to 2.1, with the percentage of respondents saying that shipments had declined rising from 17.1 percent to 26.2 percent. As noted, these decreases in activity were likely due to poor weather conditions, much like we observed in last week’s weaker industrial production figures.

Hiring remained one of the positives in the Empire State survey report. The index for the number of employees sustained much of its growth pace for the month, albeit with a slight decline (down from 12.2 to 11.3). Still, in light of the softer measures elsewhere, the fact that hiring remained relatively strong should be taken as a vote of confidence on the part of manufacturers for the future.

In fact, manufacturing leaders continue to be mostly positive in their outlooks for the next six months, speaking to the temporary nature of February’s decreases in activity. The forward-looking index for new orders increased significantly from 39.1 to 45.3, with the percentage of respondents thinking that sales would grow in the coming months up from 51.8 percent to 55.0 percent. Indeed, manufacturers also anticipate growth to expand for shipments (up from 30.6 to 43.3) and employment (up from 20.7 to 25.0).

Interestingly, both capital expenditures (down from 12.2 to 2.5) and technology spending (down from 12.2 to zero) decelerated for the month. We will need to watch to see where these measures go, as higher demand should lift investment activity moving forward.

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

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Empire State Survey: Manufacturing Activity Rebounded to Begin the New Year

The New York Federal Reserve Bank said that manufacturing activity rebounded in January. The Empire State Manufacturing Survey’s composite index increased from very modest growth in December (2.2) to stronger activity in January (12.5). This data reflects revisions due to new seasonal adjustments. More importantly, the report suggests that the pace of growth in January was the highest since May 2012 – definitely a hopeful sign as we begin the new year.

The better data reflected both sales and shipments strength. For instance, the index for new orders rose from -1.7 in December to 11.0 in January. To help explain this shift, the percentage of respondents saying that their new orders were higher for the month jumped from 24.0 percent to 34.7 percent. Likewise, the shipments index increased from 4.7 to 15.5, with those suggesting that their shipments had fallen decreasing from 26.7 percent to 17.1 percent.

The employment numbers were also improved. In December, the average employee workweek was contracting on net (-10.8), but that expanded to slight gains in January (1.2). On the hiring front, employment moved from being stagnant in December (zero) to decent increases in January (12.2), with over 24 percent of those completing the survey indicating that they had added workers in the month. Still, 63.4 percent of respondents made no changes to employment, suggesting only modest increases overall.

Pricing pressures also accelerated, with the index for raw material costs up sharply from 15.7 to 36.6. The percentage of survey-takers who said that the prices that they paid for inputs were higher in the month rose from 16.8 percent in December to 37.8 percent in January.

Looking ahead six months, manufacturers in the New York Fed’s district remain mostly positive. The forward-oriented measure of new orders increased from 30.2 to 39.1, with over half of all respondents saying that they expect sales to increase in the first half of 2014. The data for shipments, employment, and capital spending growth also indicated an optimistic outlook ahead.

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

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Empire State Survey: Manufacturing Continues to Stall in the New York Fed District

The New York Federal Reserve Bank said that manufacturing activity improved somewhat in December, but it still remained stalled overall. The Empire State Manufacturing Survey’s composite index increased from a slight contraction (-2.2) in November to a slight expansion (1.0) in November. Indeed, overall activity had generally decelerated over the past few months, with the main index down from its recent peak of 9.5 in July.

New orders contracted for the second straight month, with one-quarter of the respondents saying that their sales declined in December. Just over half reported that their new orders were unchanged for the month. Likewise, the average workweek shortened further, with the index down from -5.3 to -10.8. Hiring was unchanged at zero. Overall, 73.5 percent of those completing the survey said that their employment levels had not changed in December.

On the positive side, shipments activity improved, up from -0.5 to 7.7. The percentage of survey-takers with increasing shipments rose from 24.8 percent to 33.4 percent.

Despite the poor current manufacturing figures, business leaders continue to be mostly positive about the next six months, albeit with some easing in sentiment in December. The forward-looking composite index decreased from 37.5 to 35.7. The expected data on new orders, shipments, hiring, and capital spending all declined for the month, but overall, they suggest cautious optimism for the new year. For instance, over 40 percent of respondents anticipate higher sales in the next six months, with only 13.9 percent forecasting them lower.

Hiring is predicted to grow modestly, with 24.1 percent of respondents planning to add to their workforce. Still, over 60 percent plan to make no changes to their employment levels over the next six months. For those who are looking for talent, finding qualified workers appears to be “increasingly difficult.” In a series of special questions, the inability to find qualified workers was cited by 70.4 percent of respondents as a major problem, making it second only to employee benefit costs (85.2 percent). Other top challenges included taxes (66.7 percent), government regulation (61.7 percent), and weak sales (40.7 percent).

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

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Monday Economic Report – November 18, 2013

Here is the summary for this week’s Monday Economic Report:

In July, year-over-year growth in manufacturing production was 1.2 percent, the slowest pace of growth in output for the sector since January 2010. It was the culmination of weaknesses experienced among manufacturers since mid-2012 as global demand and domestic uncertainties weighed heavily on overall production, pushing it to disappointingly low levels. Since then, however, we have begun to see a pickup in new orders and overall sentiment. The year-over-year pace of manufacturing production was 3.3 percent in the Federal Reserve Board’s most recent industrial production report. Manufacturing output has risen 1.1 percent in just the past three months, with capacity utilization up from 75.7 percent to 76.2 percent over that time frame.

While there has been progress, some weaknesses persist for the sector. Nondurable goods production continues to lag behind durable goods, with year-over-year growth of 1.5 percent for nondurable goods firms relative to a much stronger 5.4 percent increase for durable goods. Moreover, manufactured goods exports remain slow, up 2.2 percent year-to-date through September relative to the same nine-month period in 2012. Nonetheless, this suggests some improvement from the 1.7 percent year-to-date rate that was observed through June, with declines in export levels to Europe lessening as the year progresses. Meanwhile, the overall U.S. trade deficit widened from $38.7 billion in August to $41.8 billion in September largely on higher goods imports.

Labor productivity in the manufacturing sector rose at a slower pace in the third quarter, up 0.4 percent versus the 2.7 percent gain in the second quarter. Output was higher in the third quarter, led by strong gains for durable goods businesses. Unit labor costs were down 0.4 percent for durable goods manufacturers, helping to make them more competitive globally. Unit labor costs have decreased a whopping 11.1 percent for the durable goods sector since the end of the recession. In contrast, the numbers for nondurable goods manufacturers were more challenging, with third-quarter output down 0.3 percent and unit labor costs up 3.4 percent.

The two sentiment surveys released last week were both lower. The National Federation of Independent Business’s (NFIB) Small Business Optimism Index dropped from 93.9 in September to 91.6 in October. Weaker sales growth and continuing political frustrations were key factors in the latest drop in attitudes.

Meanwhile, the Empire State Manufacturing Survey from the New York Federal Reserve Bank reported contracting activity levels in November for the first time since May, with reduced new orders and shipments and employment stalled. Despite reduced optimism about the current economic environment, manufacturers in the New York Federal Reserve district remain mostly upbeat about the next six months. Nearly half of the respondents anticipate increased new orders and shipments in the coming months, with one-third expecting to add new workers. The latter is a potentially hopeful sign, especially with so many manufacturers hesitant to hire of late. Indeed, 56.6 percent said they were not planning to change their employment levels.

This week, we will learn even more about current manufacturing activity, with new surveys from the Kansas City and Philadelphia Federal Reserve Banks. In addition, Markit will release Flash PMI survey data for the United States, China and the Eurozone. Financial markets will focus on the minutes of the Federal Open Market Committee’s meeting October 29–30, trying to glean additional insights about future monetary policy directions before the upcoming December 19–20 meeting. As such, this will build on last week’s confirmation hearing of Janet Yellen to be the next Federal Reserve Board chair, in which she mostly reiterated the need to continue the Federal Reserve’s accommodative policies. Other highlights will be new data on consumer and producer prices, existing home sales, homebuilder optimism, job postings, retail sales and state employment changes.

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

manufactured goods exports - nov2013

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Empire State Survey: Manufacturing Activity Declined in November

The New York Federal Reserve Bank said that manufacturing activity declined in November, the first contraction since May. The Empire State Manufacturing Survey’s composite index shifted from very slight growth (1.5) in October to a small net decrease (-2.2) in November. Indeed, overall sentiment has pulled back each month since peaking at 9.5 in July.

The underlying data were lower across-the-board. The index of new orders fell from 7.8 to -5.5. The percentage of respondents suggesting that their sales had increased over the past month declined from 29.6 percent to 22.5 percent, with nearly half of those taking the survey in each month saying that their orders were the same. Shipments (down from 13.1 to -0.5) and the average employee workweek (down from 3.6 to -5.3) followed suit. Meanwhile, net hiring ground to a halt (down from 3.6 to zero), with 73.7 percent of respondents noting no change in employment in November.

Despite the current weaknesses, manufacturers are mostly positive about the next six months, with the forward-looking composite index decreased only barely from 40.8 to 37.5. More importantly, just over half of survey takers anticipate higher new orders and shipments in the coming months, and other data reflect cautious optimism, as well.

The biggest shift was in the expected employment figure, with the index up from 7.2 to 22.4. Nearly one-third of respondents said that they expect additional hiring in the next six months, up from 19.3 percent last month. That would be quite encouraging if it comes to fruition; yet, it is also true that 56.6 percent plan to make no changes in hiring. Expected capital spending was mixed, with overall growth in expenditures easing (down from 15.7 to 9.2) but technology purchases edging higher marginally (up from 12.1 to 13.2).

In terms of pricing pressures, manufacturers said that their prices for raw materials increased by 3.4 percent in 2013. The prices paid is expected to rise to 4.0 percent in 2014.

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

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NY Fed: Manufacturing Activity Higher in August, But At a Slower Pace than in July

The New York Federal Reserve Bank said that manufacturing activity expanded in August, and it has been positive in 6 out of the past 7 months. With that said, demand and production eased in August, weakening manufacturers’ perceptions about the current economic environment. The Empire State Manufacturing Survey’s composite index declined marginally from 9.5 in July to 8.2 in August.

The reduced sentiment was mainly seen in the sales and production measures. For instance, the index of shipments dropped from 9.0 to 1.5, with the percentage of respondents saying that their shipments had declined in the month rising from 22.2 percent to 29.6 percent. About 31 percent of those taking the survey said that their shipments had increased in August, or roughly the same who said as much in July. The story was similar for new orders, with that index dropping from 3.8 to 0.3. As such, it suggests that sales have stalled, which could impact future levels of activity.

Nonetheless, the employment data were more upbeat. The index for the number of employees rose from 3.3 to 10.8, and the percentage suggesting that employment was higher rose from 15.2 percent to 22.9 percent. Likewise, the average employee workweek shifted from a net decline (-7.6) to a modest gain (4.8). Still, roughly two-thirds of respondents said that their hiring levels were unchanged.

Looking ahead, manufacturers continue to be cautiously optimistic. Approximately 45 percent of manufacturers in the New York Fed district expect new orders and shipments to increase over the course of the next six months, with about 15 percent anticipating declines. Inventories are predicted to decline, and pricing pressures should accelerate, according to survey participants.

Capital spending and hiring are also expected to increase, but only very modestly at best. In a series of special questions, respondents said that they estimate capital investments to grow one percent this year, with employment levels flat. This differs somewhat from the earlier questions on hiring, which were more mixed. In those questions, manufacturers anticipate a small pickup in employment on net, but with an average workweek that was reduced.

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

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NY Fed: Improvement in General Business Conditions, But Other Measures Weaken

The New York Federal Reserve Bank said that manufacturers’ perceptions about general business conditions improved in June, even as other measures of activity weakened. The Empire State Manufacturing Survey’s composite index rose from -1.4 in May to 7.8 in June. This good news was somewhat tempered by the fact that there is still a high degree of cautiousness in many of the responses. For instance, nearly half of those taking the survey felt that business conditions had not improved since last month, with 21.6 percent commenting that they were worse.

Indeed, most of the other key subcomponents were lower in June than in May. The new orders index dropped from -1.2 to -6.9. The largest difference between the two months was the percentage that said that their sales had increased, falling from 30.5 percent in May to 23.2 percent in June. (The difference primarily flowed into those suggesting that new orders were the same.) Similarly, the shipments index decreased from 0 to -11.8, and the average workweek index declined from -1.1 to -11.2.

Illustrating just how stalled hiring is right now, the employment index shifted from somewhat modest growth (5.7) to no growth (zero). Roughly 81 percent of respondents said that the number of employees had not changed this month, with the remainder split between positive or negative hiring.

On the positive side, the forward-looking measures remained cautiously optimistic, even as there was some easing in many of the variables. Almost 37 percent feel that new orders should increase in the next six months, with 46.5 percent feeling that they will remain the same. At the same time, employment growth is expected to be increase very slowly (down from 11.4 to 1.6), with capital spending following suit (down from 22.7 to 3.2). Technology investment has actually turned negative this month (down from 11.4 to -3.2), with 83.9 percent planning to make no changes.

In short, the Empire State Manufacturing Survey is our first glimpse at June sentiment among manufacturers. Unfortunately, the data are more pessimistic than positive, with continued weaknesses in the sector. We will get data from the Philadelphia Fed on Thursday. They will hopefully improve from last month’s contracting levels.

Chad Moutray is chief economist, National Association of Manufacturers.

 

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Empire State Survey Says That Manufacturing Activity Rebound Continued in March

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.

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Monday Economic Report – February 19, 2013

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.

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