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.