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Economy in Brief

U.S. Empire State Manufacturing Index Declines in May
by Kathleen Stephansen, CBE  May 16, 2022

• The Empire State Manufacturing Index of General Business Conditions dipped thirty-six points in May.

• Employment rises modestly.

• Prices paid and received ease slightly.

The Empire State Manufacturing Index of General Business Conditions dropped thirty-six points to -11.6 in May from 24.6 in April, according to the Empire State Manufacturing Survey released by the Federal Reserve Bank of New York. A reading of 16.0 had been expected for May in the Action Economics Forecast Survey. The May reading was the second negative reading in the past three months. Twenty percent of respondents reported that conditions had improved over the month, while 32% reported that conditions had worsened. The latest survey was conducted between May 2 and May 9.

Haver Analytics constructs an ISM-adjusted Empire State diffusion index using methodology similar to the ISM series. The index was at 51.8 in May, down from 60.2 in April. A reading above 50 signals 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 34 points in May to -8.8 from 25.1 in April. A lessened 24.9% of respondents reported higher orders in May, while an increased 33.7% reported lower orders. The shipments index plunged to -15.4 in May from 34.5 in April. A sharp decline to 22.0% of respondents, from 45.4% in April, reported higher shipments, while an increased 37.4% reported lower shipments in May.

The unfilled orders index fell to 2.6 in May from 17.3 in April. The delivery times index held relatively steady at 20.2 in May versus 21.8 in April, with a lessened 28.9% of respondents reporting higher delivery times and 8.8% of respondents reporting lower delivery times. The inventories index fell to 7.9 in May from 13.6 in April.

The number of employees index increased to 14.0 in May from 7.3 in April. An increased 20.9% of respondents reported increases in employment in May, while 6.8% reported lower employment. The average workweek rose moderately to 11.9 from 10.0 in April.

After reaching a record high of 86.4 in April, the prices paid index fell to a still elevated 73.7 in May, and the prices received index edged down to 45.6 from 49.1 in April, signaling ongoing substantial increases in both input prices and selling prices, though at a slower pace than in April. A lessened 76.3% of respondents reported higher prices paid in May, while 2.6% reported lower prices paid. An increased 51.8% of respondents reported higher prices received in May, while 6.1% reported lower prices received.

As in April, firms expressed less optimism about the six-month outlook than they did earlier this year. The index for future business conditions stood at 18.0 in May, up slightly from 15.2 in April. Expectations for new orders, shipments, and unfilled orders rose slightly this month. Expectations for delivery times, inventories, prices paid, prices received, and employment, all fell this month. Expectations for capital spending fell to its lowest level in several months. Expectations for technology spending fell modestly.

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.

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