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Economy in Brief

U.S. Empire State Manufacturing Activity Surges in July
by Peter D'Antonio  July 15, 2021

• Activity index jumps to highest level on record.

• New orders and shipments measures rebound sharply.

• Prices paid ease again, but remain strong.

The Empire State Manufacturing Index of General Business Conditions surged by 25.6 points to a record high 43.0 in July, far surpassing the 18.8 reading that had been expected in the Action Economics Forecast Survey. For the first time in over a decade, more than half the respondents reported improved business conditions, while only 7.3% reported that conditions had worsened. Haver Analytics constructs an ISM-adjusted Empire State diffusion index using methodology similar to the ISM series. The latest reading of 63.4 was the highest for this index in its 20-year history. The surge in July followed a brief dip to a still-high 57.0 in June. The July reading was the third in four months above 60. A reading above 50 signifies positive growth.

Increases were widespread among the components of the Empire State Survey. The important new orders series jumped 16.9 points to 33.2, the highest level since 2004. Likewise, the shipments measure skyrocketed to 43.8 after dipping to 14.2 in June. Unfilled orders also gained, rising to 12.1 from 7.9 in June. Inventories increased to 16.2, following a negative reading in June. The delivery time index dipped to a still-high 20.2, indicating slower delivery speeds, after reaching a record 29.8 in June.

The number of employees index rose to 20.6 from 12.3 in June, breaking out of the narrow trend of the previous six months. A greatly increased 29.5% of respondents reported more hiring while a lower 8.9% reported less. The average workweek reading fell to 14.0 from 15.1.

The prices paid index edged down again to 76.8 from 79.8 in June and the record 83.5 in May. However, it continued to indicate sharply stronger prices. Seventy nine percent of respondents cited higher prices while only 2.0% paid less. This was the sixth consecutive month of extremely elevated readings for the prices paid index. Given the nature of diffusion indexes, which in this case compare prices this month to last, these consistently high readings suggest that price increases are compounding. The prices received measure also indicated continued rising prices, hitting a new record high 39.4.

The index of business conditions in six months retreated to 39.5 this month, after rising to a 12-month high of 47.7 in June. Expectations for prices paid edged up to 64.6, while expectations for prices received leaped to 57.6, the highest reading on record.

The Empire State data, reported by the Federal Reserve Bank of New York, reflect business conditions in the manufacturing sector in New York, northern New Jersey and southern Connecticut. The headline measure is constructed from the answer to a single question on business conditions. The Empire State figures are diffusion indexes, which are calculated by subtracting the percent of respondents reporting declines from those reporting gains. The data are available in Haver's SURVEYS database. The ISM-adjusted headline index dates back to 2001. The Action Economics Forecasts can be found in Haver's AS1REPNA database.

Empire State Manufacturing Survey Jul Jun May Jul'20 2020 2019 2018
General Business Conditions (Diffusion Index, %, SA) 43.0 17.4 24.3 17.2 -5.9 4.8 19.7
General Business Conditions Index (ISM Adjusted, >50=Increasing Activity, SA) 63.4 57.0 60.3 52.6 49.3 51.8 56.4
  New Orders 33.2 16.3 28.9 13.9 -4.3 3.3 16.4
  Shipments 43.8 14.2 29.7 18.5 -0.2 10.5 20.3
  Unfilled Orders 12.1 7.9 21.4 -0.6 -7.7 -6.0 3.5
  Delivery Time 20.2 29.8 23.6 2.6 2.7 -0.1 9.1
  Inventories 16.2 -2.6 7.1 -9.7 -3.9 -0.9 5.9
  Number of Employees 20.6 12.3 13.6 0.4 -1.2 5.4 12.3
  Average Employee Workweek 14.0 15.1 18.7 -2.6 -6.9 2.3 7.8
  Prices Paid 76.8 79.8 83.5 14.9 21.5 26.3 45.8
  Prices Received 39.4 33.3 37.1 -4.5 4.8 10.3 19.3
Expectations 6 Months Ahead 39.5 47.7 36.6 38.4 29.7 23.9 35.2
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