The New York Federal Reserve Bank found that manufacturing new orders and business conditions were lower in May. The Empire State Manufacturing Survey’s composite index of general business activity declined from 3.1 in April to -1.4 in May. This is the first contracting level for the index’s main measure since January, ending three months of growth. Still, more than anything, this statistic mostly observed how manufacturing activity has mostly stagnated in the past month or so. Indeed, 48.5 percent of survey respondents said that conditions had not changed, with those saying that they were better or worse nearly offsetting one another at 25.0 percent and 26.5 percent, respectively.
The subcomponents of the index tend to back this view up. The pace of new orders declined modestly on net, with its index down from 2.2 to -1.2. Other contracting figures included shipments (-0.02), unfilled orders (-6.8), delivery times (-3.4), inventories (-8.0), and the average workweek (-1.1). Pricing pressures eased somewhat for the month (down from 28.4 to 20.5), but still suggest decent growth. Nearly two-thirds of survey respondents, though, suggest that raw material prices had not changed in the past month.
Even as the average workweek was lower, it appears that manufacturers continue to hire, with its index down just modestly from 6.8 to 5.7. While 71.6 percent of respondents said that their employment levels had not changed in the past month, 17.1 percent noted increases, and 11.4 percent reported declines. Still, the net growth in hiring is perhaps surprising given the sluggishness of employment growth nationally and the other weaknesses in the Empire State survey.
Continued hiring could perhaps be explained by cautious optimism in the forward-looking measures. Those manufacturers in the New York Fed’s survey who complete this survey remain positive – albeit less so than last month – about increases in new orders, shipments, employment, and capital spending plans. One-quarter of respondents plan to hire more workers, over one-third expect to increase their capital investments, and nearly 40 percent anticipate higher sales.
Chad Moutray is the chief economist, National Association of Manufacturers.