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Economy in Brief

U.S. Empire State Manufacturing Activity Weakens Sharply in August
by Tom Moeller  August 16, 2021

• Activity index reverses prior month's improvement.

• New orders and employment weaken notably.

• Pricing power eases again, but remains strong.

The Empire State Manufacturing Index of General Business Conditions declined 25 points in August to 18.3 and reversed its 26 point surge to a record 43.0 in July. A reading of 27.7 had been expected in the Action Economics Forecast Survey. A greatly lessened 34.5% of respondents reported improved business conditions, while an increased 16.3% 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 fell to 56.7 from the record high of 63.4 in July. A reading above 50 signifies positive growth.

Movement amongst the component series was mixed this month. The new orders measure weakened to 14.8 and reversed all of its doubling to 33.2 in July, which had been the highest level since 2004. The shipments reading plummeted to 4.4 after surging to 43.8 in July. Inventories fell to 6.2 after strengthening to 16.2 in July. Moving higher were unfilled orders to 15.0 after rising last month to 12.1. The delivery time index rose to 28.3 and recovered most of its July decline.

The number of employees index weakened to 12.8 and reversed a July rise to 20.6. A lessened 23.1% of respondents reported more hiring while a greater 10.4% reported less. The average workweek reading fell to 8.9, its lowest level since January.

The prices paid index fell to 76.1 from 76.8 in July, and stood below the record 83.5 in May. Seventy-seven percent of respondents indicated higher prices while only 0.9% paid less. The prices received measure surged to a record high of 46.0.

The index of business conditions in six months rose to 46.5 this month and recaptured all but a piece of its July decline to 39.5. Expectations for new orders & shipments rose but employment weakened. Expectations for prices paid rose modestly while prices received pulled back after surging to a record in July.

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 Aug Jul Jun Aug'20 2020 2019 2018
General Business Conditions (Diffusion Index, %, SA) 18.3 43.0 17.4 3.7 -5.9 4.8 19.7
General Business Conditions Index (ISM Adjusted, >50=Increasing Activity, SA) 56.7 63.4 57.0 49.8 49.3 51.8 56.4
  New Orders 14.8 33.2 16.3 -1.7 -4.3 3.3 16.4
  Shipments 4.4 43.8 14.2 6.7 -0.2 10.5 20.3
  Unfilled Orders 15.0 12.1 7.9 -14.0 -7.7 -6.0 3.5
  Delivery Time 28.3 20.2 29.8 1.3 2.7 -0.1 9.1
  Inventories 6.2 16.2 -2.6 -10.7 -3.9 -0.9 5.9
  Number of Employees 12.8 20.6 12.3 2.4 -1.2 5.4 12.3
  Average Employee Workweek 8.9 14.0 15.1 -6.8 -6.9 2.3 7.8
  Prices Paid 76.1 76.8 79.8 16.0 21.5 26.3 45.8
  Prices Received 46.0 39.4 33.3 4.7 4.8 10.3 19.3
Expectations 6 Months Ahead 46.5 39.5 47.7 34.3 29.7 23.9 35.2
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