The Empire State Manufacturing Survey expanded again in June, rebounding from softness in May. The composite index of general business conditions improved from -9.0 in May to 6.0 in June, growing for the third time in the past four months. This is a sign that manufacturing activity in the New York Federal Reserve Bank district has stabilized somewhat from where it was in the second half of last year and earlier this year. The pickup in activity stemmed largely from better new orders (up from -5.5 to 10.9) and shipments (up from -1.9 to 9.3) growth. Indeed, more than one-third of respondents to this survey said that sales were higher in June, up from 22.1 percent in May. Yet, a still-sizable number (23.3 percent) noted declining new orders for the month, highlighting ongoing challenges, with 42.5 percent citing no change in demand in June.
The labor market data were less encouraging. The average employee workweek (down from -8.3 to -5.1) continued to narrow, albeit at a slower pace than last month, and hiring (down from 2.1 to zero) was flat on net. That could turn around, however, if increased activity continues moving forward, which would necessitate more hiring.
Manufacturers in the New York Federal Reserve Bank’s district were more upbeat about the next six months. The forward-looking composite index rose from 28.5 to 34.8, its highest level so far in 2016. New orders (up from 22.4 to 38.2), shipments (up from 24.4 to 29.1) and capital expenditures (up from 3.1 to 11.2) each improved looking ahead in this report. Yet, the hiring data indicated continuing softness in the labor market in the second half of this year, with the future-oriented index for number of employees (down from 10.4 to -2.0) contracting for the first time since November 2012. The average workweek (down from 5.2 to 2.0) and technology spending (down from 6.3 to 4.1) were also softer than desired.