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Economy in Brief

Empire State Manufacturing Index Rises Back Above Zero
by Carol Stone, CBE  July 15, 2022

• Shipments increase at more companies.

• New orders have modest net improvement.

• Share of companies paying higher prices still high but shows some easing.

The Empire State Manufacturing Index of General Business Conditions recovered to positive territory in its July survey, reaching 11.1 from June's -1.2 and -11.6 in May. The Action Economics Forecast Survey had expected a modest increase but still in negative territory at -0.6. The percentage of respondents reporting an increase in business conditions was 33.6%, up from 27.6% in June, while the percentage reporting a decrease was 22.6%, down from 28.8% in June.

The latest survey was conducted between July 5 and July 11. The headline index simply reflects the answer given to a single question on general business conditions. About 200 managers of manufacturing companies in New York State are surveyed and about 100 reply in a timely way. Haver Analytics constructs an ISM-adjusted Empire State diffusion index using methodology similar to the ISM series and the information from five component indexes in the survey. This index rose to 57.3 in July from 56.0 in June, well above the critical 50 level that separates expansion from contraction.

Among the survey components relating to current activity, shipments were up at a net of 25.3% of respondents, reflecting an increase in companies reporting an increase from 30.7% in June to 39.9% this month and a decrease in the number with a decline, from 26.7% in June to 14.6% this month. New orders rose at a net of 6.2% of respondents, up marginally from 5.3% in June; there was a modest decrease in those experiencing larger new orders, at 33.7% in the July survey from 34.6% the month before and a decrease in those with a decline in new orders from 29.3% in June to 27.5% this month.

The unfilled orders index edged slightly lower to -5.2% from -4.3%. The share of companies with higher unfilled orders decreased to 18.3% from 22.2%, while the share with lower unfilled orders also decreased, edging down to 23.5% from 26.5%. With lower unfilled orders, it's not surprising that the delivery times index declined on balance, from 14.5 in June to 8.7 in July. This is the lowest since February 2021. The inventories index decreased slightly to 14.8 from 17.1 in June.

The share of firms increasing the number of employees increased to 29.5% in July from 24.5% in June, while firms reducing the number of employees increased to 11.5% from 5.5%. These moves yield an employment index of 18.0, down modestly from 19.0 in June. The average workweek index eased to 4.3 this month from 6.4 in June.

Prices paid by firms and prices received by firms were still heavily tilted toward increases, but less so than in recent months. The prices paid index was 64.3 in July, down from 78.6 the prior month while the prices received index in July was 31.3 versus 43.6 in June.

Companies' expectations for the next six months weakened noticeably in this July survey. The index of general business conditions fell below zero, reaching -6.2 after +14.0 in June. This is the first negative total since February 2009. Net negative responses marked all components except new orders, which were roundly at zero, and shipments, which were at 7.2, their lowest also since February 2009. Unfilled orders, delivery times and inventories all had net negative readings while other components moved negatively.

The Empire State data, reported by the Federal Reserve Bank of New York, reflect business conditions in the manufacturing sector in New York State. 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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