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Economy in Brief

Empire State Manufacturing Index Rebounds Modestly in June
by Sandy Batten  June 15, 2022

• General business conditions in the FRBNY district were mostly unchanged in June after having deteriorated markedly in May.

• New orders and shipments rebounded.

• Prices paid rose while delivery times fell.

The Empire State Manufacturing Index of General Business Conditions rebounded modestly in June after a sharp decline in May. The index increased 10.4 points to -1.2 in June from -11.6 in May. The June reading indicates that general business conditions were essentially unchanged in the month. The Action Economics Forecast Survey had anticipated an increase to 3.4. The index has posted a negative reading in three of the past four months. The percentage of respondents reporting an increase in business conditions increase to 27.6% from 19.9% in May while the percentage reporting a decrease eased to 28.8% from 31.5% in May. The latest survey was conducted between June 2 and June 9.

The headline index simply reflects the answer given to a single question on general business conditions. Haver Analytics constructs an ISM-adjusted Empire State diffusion index using methodology similar to the ISM series and information from five component indexes in the survey. This index rose to 56.0 in June, well above the critical 50 level that separates expansion from contraction, from 51.8 in May.

As the calculated ISM-adjusted index indicates, the details in the report were not as weak as the headline figure suggested. Both the new orders index and the shipments index rebounded to above zero in June. New orders rose to 5.3 from -8.8 in May and shipments increased to 4.0 from -15.4 in May. The percentage reporting an increase in new orders rose to 34.6% from 24.9% while the percentage reporting an increase in shipments increased to 30.7% from 22.0%. Percentages reporting declines fell for both new orders and shipments.

The unfilled orders index fell to -4.3 in June from 2.6 in May and 17.3 in April as 26.5% reported a decline, the highest reading since November 2020. The delivery times index declined to 14.5 in June, its lowest reading since March 2021, from 20.2 in May. The inventories index jumped to 17.1 in June from 7.9 in May.

The number of employees index increased to 19.0 in June from 14.0 in May. The percentage of respondents increasing employment rose to 24.5% from 20.9% while the percentage reducing employment fell to 5.5% from 6.8%. By contrast, the average workweek index fell to 6.4 in June from 11.9 in May.

Inflation indicators remained elevated. The prices paid index rose to 78.6 in June from 73.7 in May after having reached a record 86.4 in April. The prices received index fell for the third consecutive month—to 43.6 in June from 45.6 in May and 49.1 in April. These are still some of the highest readings for these two variables in their history which dates back to 2001.

Looking ahead to the next six months, respondents' optimism waned, declining to 14.0, the lowest reading since April 2020, from 18.0 in May with declines rather broadly spread across components.

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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