Empire State Manufacturing Survey Strengthens From Contraction

The Empire State Manufacturing Survey for June 2023 released yesterday indicated a limited rebound in business activity in the state of New York, after a -31.8 reading of deep contraction for May.

The general business conditions index rose by thirty-eight points to 6.6, demonstrating a modest overall improvement in the state’s business environment.

Several factors contributed to this rebound:

1. New Orders and Shipments: The new orders index climbed thirty-one points to 3.1, indicating a slight increase in orders. The shipments index significantly increased by thirty-eight points to 22.0, pointing to a significant rebound in shipment activity. An encouraging sign, but with new orders only showing a slight increase this pace may moderate.

2. Unfilled Orders and Inventories: The unfilled orders index remained negative at -8.0, suggesting a continued decline in unfilled orders. The inventories index also remained negative at -6.0, indicating a decrease in inventories. These are both negative signs. It would be better to see backlogs building back up, which would then necessitate inventory replenishment.

3. Delivery Times: The delivery times index was reported at -1.0, suggesting thatdelivery times remained largely unchanged.

4. Employment and Work Hours: The index for the number of employees remained negative for the fifth consecutive month at -3.6, and the average workweek index also held below zero at -5.8. This indicates a continued contraction in employment and work hours. A sign that the labor market for manufacturing in New York continues to show signs of increasing weakness.

5. Prices: The prices paid index fell thirteen points to 22.0, and the prices received index fell fifteen points to 9.0. This indicates a significant moderation in price increases, with both price indexes now at levels similar to those before the pandemic.

6. Future Outlook: The index for future business conditions increased nine points to 18.9, its second consecutive monthly increase. This suggests that firms have become more optimistic about the future, expecting modest increases in new orders and shipments, and an expansion in employment.

In review, the rebound in the Empire State Manufacturing Survey is due to a combination of increased shipments, a slight increase in new orders, and an optimistic future outlook.

The capital spending index only increased seven points to 8.0, suggesting that capital spending plans remained soft. This could indicate caution among businesses about making significant investments in the current environment.

Continued contraction in employment and work hours, along with soft capital spending plans, suggest that there remain challenges in the manufacturing sector. The lack of a meaningful build in new orders or backlog indicates that manufacturing business conditions continue to be difficult in New York.