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Economy in Brief

U.S. Empire State Manufacturing Index Fell Sharply in March
by Kathleen Stephansen, CBE  March 15, 2022

• Business activity declined in New York State for the first time since early in the pandemic.

• Selling price increases hit record high.

• The six-month outlook improves.

The Empire State Manufacturing Index of General Business Conditions fell fifteen points in March to -11.8, its lowest level since May 2020. A reading of 8.8 had been expected in the Action Economics Forecast Survey. Twenty-four percent of respondents reported that conditions had improved, down from 33.5% last month, while 35.4% reported that conditions had worsened, up from 30.5% in February. The latest survey was conducted between March 2 and March 9.

Haver Analytics constructs an ISM-adjusted Empire State diffusion index using methodology similar to the ISM series. The latest reading declined to 55.0 in March from 56.1 in February. It remains well below the July 2021 high of 63.4. A reading above 50 signifies growth. In contrast to the ISM index, the headline Empire Index reflects the answer to a single question, not calculated from its components.

The new orders index fell in March to -11.2 from 1.4 in February and the shipments index fell to -7.4 from 2.9 last month. A lessened 26.2% of respondents reported higher shipments, while an increased 33.6% reported lower shipments.

The unfilled orders index fell to 13.1 in March down from 14.4 in February. The March delivery times index climbed to 32.7, with an increased 38.3% of respondents reporting higher delivery times and a sharply lower 5.6% of respondents reporting lower delivery times. The inventories index rose to 21.5 in March, the fastest past since September 2001.

The number of employees index dropped 8.6 points to 14.5, suggesting only a modest rise in employment levels. Twenty-one percent of respondents reported increases in employment during March and 6.2% reported lower employment. The average workweek declined to 3.5, down from 10.9 in February.

Inflation pressures continued to be mixed this month. The prices paid index edged down to 73.8 from 76.6 in February, while prices received rose to a record high of 56.1 from 54.1 last month, signaling ongoing substantial increases in both input prices and selling prices. Seventy-five percent of respondents reported higher prices paid in March, while only 0.9% reported lower prices paid.

The index of expected conditions in six months rebounded to 36.6 this month from 28.2 in February. Expectations for new orders, shipments, unfilled orders, delivery times, inventories, prices paid, prices received, and employment, all rose this month. And while expectations for both capital and technology spending eased relative to February, they remain firm historically.

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 the percent 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 Mar Feb Jan Mar'21 2021 2020 2019
General Business Conditions (Diffusion Index, %, SA) -11.8 3.1 -0.7 17.4 23.3 -5.9 4.8
General Business Conditions Index (ISM Adjusted, >50=Increasing Activity, SA) 55.0 56.1 54.4 55.9 58.9 49.3 51.8
  New Orders -11.2 1.4 -5.0 9.1 21.7 -4.3 3.3
  Shipments -7.4 2.9 1.0 21.1 20.1 -0.2 10.5
  Unfilled Orders 13.1 14.4 12.1 4.0 12.5 -7.7 -6.0
  Delivery Time 32.7 21.6 21.6 11.4 23.8 2.7 -0.1
  Inventories 21.5 11.7 10.3 8.1 7.8 -3.9 -0.9
  Number of Employees 14.5 23.1 16.1 9.4 15.9 -1.2 5.4
  Average Employee Workweek 3.5 10.9 10.3 10.9 14.2 -6.9 2.3
  Prices Paid 73.8 76.6 76.7 64.4 73.0 21.5 26.3
  Prices Received 56.1 54.1 37.1 24.2 36.7 4.8 10.3
Expectations 6 Months Ahead 36.6 28.2 35.1 36.4 40.6 29.7 23.9
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