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 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.
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.
The New York Federal Reserve Bank’s Empire State Manufacturing Survey reported contracting levels of activity for four straight months. The composite index edged slightly higher, from -6.2 in October to -5.2 in November, but it remains in negative territory, suggesting a contraction. The percentage of respondents suggesting that business conditions had improved in the past month dropped from 24.6 percent to 19.1 percent, with almost 57 percent of manufacturers saying that conditions were the same. Uncertainties in the marketplace are forcing a lot of business leaders into a wait-and-see posture, it seems.
Despite the increased levels of anxiety about the overall business climate, many of the underlying data points reflect some improvements from the previous month. For instance, the index for new orders rose from -9.0 to 3.1, a pretty sizable gain and a movement from contraction to a slight expansion. Shipments also had progress, up from -6.4 to 14.6. Nonetheless, increased activity has not translated into more hiring. Measures for employment and the average workweek both weakened, with the index for number of employees dropping from -1.1 to -14.6. Over one-quarter of respondents now say that they have fewer employees this month than last, which is not a good sign.
The hesitance to hire could in part be influenced by a weakening of the perceived economic environment over the next six months. The forward-looking general business conditions index fell from 19.4 to 12.9. To be fair, this still indicates modest growth in the coming months, which is reflected in higher new orders, shipments, and capital spending data. Almost 44 percent of manufacturers in the New York region, for example, expect their sales to increase moving into 2013, with one-third anticipating no change. Once again, though, this does not mean more employment. The number of employees over that time frame is expected to slightly shrink, with the index down from zero to -1.1.
In summary, the Empire State survey is a mixed bag. New orders and shipments have improved in November, with some measures of activity expected to continue to grow moving into 2013. Yet, it is also clear that there are a lot of anxieties out there. Manufacturers’ perceptions of business conditions remain negative, dragging expectations for future growth lower. Moreover and perhaps reflecting the uncertain market right now, these businesses are not ready to increase their hiring. This suggests that manufacturers are not yet convinced that the economy is on a firm footing.
Chad Moutray is chief economist, National Association of Manufacturers.