Manufacturing activity in the New York Federal Reserve Bank’s district eased a little in December but remained strong overall. In the latest Empire State Manufacturing Survey, the composite index of general business conditions declined from 19.4 in November to 18.0 in December. While this was the second straight deceleration in the headline index, off from the three-year high of 30.2 in October, the pace of expansion has remained robust, averaging 21.0 over the past seven months. The underlying indicators were somewhat mixed. On the positive side, shipments (up from 18.4 to 22.4) strengthened in December, with growth in new orders (down from 20.7 to 19.5) slowing slightly but still expanding at a healthy pace. Hiring (down from 11.5 to 5.1) also grew at its weakest rate since July, with the average employee workweek (up from -0.8 to zero) improving to neutral in this survey. Read More
The Empire State Manufacturing Survey said that manufacturing activity bounced back in June after softening in May. The composite index of general business conditions rose from -1.0 in May, its first decline in nine months, to 19.8 in June, its fastest pace since September 2014. The strong rebound was buoyed by healthy accelerations in new orders (up from -4.4 to 18.1), shipments (up from 10.6 to 22.3) and the average workweek (up from 7.5 to 8.5). The percentage of respondents saying that orders had increased in the month rose from 20.7 percent in May to 35.1 percent in June. At the same time, hiring (down from 11.9 to 7.7) slowed somewhat, even as growth in employment remained modest. The labor market has generally improved, up in four of the past six months after contracting sharply in the ten months prior to that. Read More
The New York Federal Reserve Bank said that manufacturing activity expanded in October, but only barely. The Empire State Manufacturing Survey’s composite index declined from 6.3 in September to 1.5 in October. The good news was that manufacturers had reported positive sentiment in eight of the past nine months, even as it suggests that perceptions had decelerated from the summer months. Activity in the region was somewhat diminished by uncertainties surrounding the fiscal shutdown and debt ceiling.
Despite the downtick in optimism, the Empire State’s manufacturers reported an increase in the pace of sales for the month. The index for new orders rose from 2.4 to 7.8, the highest level observed since March. Still, roughly half of the respondents said that new orders and general business conditions were unchanged from the previous month. Moreover, the pace of shipments (down from 16.4 to 13.1) and hiring (down 7.5 to 3.6) both retreated somewhat. Inventory levels were unchanged. Pricing pressures were higher but mostly in-check, with seven out of ten respondents suggesting that raw material costs were flat for them.
Looking ahead six months, manufacturers in the New York Fed region continue to be mostly positive. The forward-looking composite index was essentially unchanged, up from 40.6 to 40.8. Measures of activity were higher across-the-board, including expected increases in new orders, shipments, employment, and capital spending. For instance, 46.5 percent of those taking the survey predict increased new orders over the next six months, with just 9.5 percent forecasting declines. Hiring is predicted to continue being skittish, however, with 80.7 percent of manufacturers planning no changes in employment levels.
Chad Moutray is the chief economist, National Association of Manufacturers.
The New York Federal Reserve Bank noted modest gains in manufacturing activity in July, building on improved perceptions in June. The Empire State Manufacturing Survey’s composite index edged marginally higher from 7.8 to 9.5, with 30.0 percent suggesting that general business conditions had improved in the past month. At the same time, nearly half of respondents said that conditions had stayed the same. This data suggest that production in the New York Fed’s district has improved in the past two months, particularly as activity had decelerated from February to May, when it registered a slight contraction.
June’s gains had been in sentiment, but most of the key subcomponents were still negative on net. This month, many of these indicators turned somewhat positive. For instance, the index for new orders rose from -6.7 in June to 3.8 in July. The percentage of those taking the survey who said that their sales had increased from 23.2 percent to 28.9 percent, with 46.0 percent suggesting that new order levels were unchanged. A similar trend was seen for shipments, up from -11.8 to 9.0.
In terms of employment, there were improvements, but also notable weaknesses. The employment index rose from zero in June to 3.3 in July, but 72.8 percent said that their hiring levels were the same. In addition, the average employment workweek remained contractionary, even as its index suggested a slower pace of decline (up from -11.3 to -7.6). Over 15 percent of respondents cited a reduced average workweek this month.
This hesitance to hire was also seen in the forward-looking measures, with 68.5 percent of respondents planning to keep their employment levels unchanged in the next six months. The expected employment index was just 1.1 (down from 1.6), suggesting very small gains in hiring moving ahead. In contrast, many of the other future-oriented indices pointed to more optimism in the second half of 2013, with improved perceptions from last month. This includes the view that new orders, shipments, and capital investments should be higher.
Chad Moutray is the chief economist, National Association of Manufacturers.
Here is the summary of this week’s Monday Economic Report:
Two events last week spooked financial markets around the world—one stemming from comments from the Federal Reserve Board and the other a realization that China’s economy was slowing. The Federal Open Market Committee (FOMC) left its current expansionary policies in place, including continuing to purchase $85 billion in mortgage-backed and long-term securities each month. Yet, the FOMC left open the possibility that these asset purchases would be reduced starting later this year, a point echoed by Federal Reserve Board Chairman Ben Bernanke in a press conference. A possible “tapering” of quantitative easing could happen, according to the Fed, because the U.S. economy has improved in recent months, and the Fed increased its economic forecasts for the next two years. It expects real GDP growth of between 2.3 percent to 2.6 percent this year, with the economy expanding by 3.0 percent to 3.5 percent in 2014. On the inflation front, pricing pressures are expected to stay below the Fed’s goal of 2.0 percent, something the latest consumer price data affirmed.
The other headline last week was growth in China, with manufacturing activity contracting for the second consecutive month. The HSBC Flash China Manufacturing Purchasing Managers’ Index (PMI) has declined from 50.5 in April to 49.6 in May to 48.3 in June. Index readings under 50 signify contraction in activity. Falling demand for new orders and exports fueled the index’s decline in June. At the same time, there are media reports that Beijing is dealing with credit concerns that could dampen its growth, possibly averting a bubble in credit markets. The fear that China might have a credit crunch combined with the Federal Reserve’s easing of its asset purchases (ending by mid-2014, according to Bernanke) sent equity markets sharply lower on Wednesday and Thursday last week, closing down 3.4 percent between Tuesday and Friday.
Here is the summary from this week’s Monday Economic Report:
Some of the indicators released last week helped confirm the belief that the U.S. economy has started 2013 on a stronger-than-expected note. First, industrial production rose 0.8 percent in February, led by strong demand for automobiles and other goods. This was a decent turnaround from much weaker numbers in January, with all but three major manufacturing sectors experiencing higher production. Second, retail sales rose a surprisingly healthy 1.1 percent in February. While much of that growth stemmed from higher gasoline prices and higher motor vehicle sales, the data suggested modest growth overall, with Americans continuing to make modest gains in purchases despite headwinds from higher taxes and fiscal uncertainties.
At the same time, those headwinds appear to be having some negative impacts. Industrial production was increasing at a 5.1 percent year-over-year pace at this point last year; today, that rate is 2 percent. That example can be replicated in so many of the recent indicators. For instance, the NAM/IndustryWeek Survey of Manufacturers reported an uptick in optimism in the latest survey, with sales expected to grow 2.3 percent over the next year. That represents an improvement from three months ago (when the rate was 1.0 percent), and the percentage of respondents who were positive about their own company’s outlook rose from about 52 percent in December to roughly 70 percent today. But this is a come-down from the stronger pace of nearly 5 percent growth in annual sales expected in March of last year (when approximately 89 percent were positive in their outlook). Clearly, more work still needs to be done to get the economy moving. Read More
The New York Federal Reserve Bank’s Empire State Manufacturing Survey observed a rebound in activity in February, ending six straight months of contraction. The composite index of general business conditions rose from -7.8 in January to 10.0 in February. The percentage of those citing reduced conditions declined from 33.7 percent to 18.7 percent, with the bulk of those responses shifting to a more neutral viewpoint. This suggests that while attitudes were definitely more positive this month, there remains some degree of caution about the larger macroeconomic picture.
Nonetheless, the larger story is the increase in manufacturing activity in February, and the principle driver of these higher figures was higher sales. The index for new orders increased from -7.2 to 13.3, a significant shift. Indeed, the percentage of businesses with higher sales this month increased from 27.9 percent in January to 35.9 percent in February. Similar responses were seen for shipments and employment. Even with the faster pace of hiring, though, it should be noted that almost 72 percent of manufacturers did not change their employment levels. As we have seen in other indicators, hiring continues to lag other measures even as other measures have started to improve.
This more-positive assessment flows into the forward-looking data, as well. The index of general business conditions based on the respondents’ future expectations rose from 22.4 to 33.1, with roughly half of those surveyed anticipating better conditions six months from now. Measures for new orders, shipments, employment, and capital spending were all higher. Inventories are not expected to change, and pricing pressures should remain elevated.
Chad Moutray is chief economist, National Association of Manufacturers.