Empire State Manufacturing Survey Declines More than Forecast

The Empire State Manufacturing Survey, the New York Federal Reserve’s gauge of manufacturing activity in the region, fell in January and missed expectations. However, manufacturing firms in New York State are optimistic about future business conditions.

The general business conditions index fell slightly from 7.6 to 6.5, though it remained positive for the third consecutive month. Readings above 0 point to expansion, while those below indicate contraction. The median forecast was expecting the reading to come in at 8.5.

The new orders index fell 7 points to 3.1, suggesting that orders increased at a slower clip than last month, and the shipments index held steady at 7.3, pointing to an ongoing increase in shipments. The unfilled orders index rose to -1.7, and the delivery time index rose to -2.5. The inventories index climbed 16 points to 2.5, signaling a slight increase in inventory levels—the first increase since mid-2015.

As previously stated, manufacturing firms in the region are still very optimistic about the future. Though the index for future business conditions was flat at 49.7, the reading matches a multiyear high hit last month in reaction to the surprise election of President-elect Donald J. Trump. Delivery times were expected to be longer, and inventories were expected to increase. The index for future employment and the future average workweek indicated that firms expected strong growth in employment and hours worked. The capital expenditures index climbed four points to 25.2, and the technology spending index edged up to 14.3.

However, current labor conditions are actually slightly worse than last month. The index for number of employees rose but held below zero at -1.7, an indication employment levels ticked down slightly; the average workweek index, at -4.2, pointed to a small decline in hours worked. Prices increased significantly this month. The prices paid index advanced fourteen points to 36.1, its highest level since 2014. The prices received index also climbed fourteen points, rising to 17.6, signaling a pickup in selling price increases.