Empire State Factory Index Fell Sharply in August

The Federal Reserve Bank of New York reported that its index of factory sector activity fell to -19.0 in August from 1.1 during July. The most recent survey was taken between August 2 & August 9. A reading of -0.5 had been expected in the Action Economics Forecast Survey.

Haver Analytics constructs an ISM-adjusted series, which is comparable to the ISM manufacturing index. This calculated index fell to 45.9 in August from 50.4 in July, though remaining above the low of 43.5 in May. A level of 50 is the break-even point between rising and falling activity.

A lessened 16.1% of survey respondents reported improved overall business conditions in August, while an increased 35.0% reported deterioration. This headline index reflects the answer to only one question concerning general business conditions and is not calculated from the components listed below.

Individual series were weak this month. The new orders reading fell 23 points to -19.9 from 3.3 in July. A lessened 19.5% of respondents reported higher new orders, while an increased 39.4% reported fewer. The shipments index dropped 26 points to -12.3 in August from 13 .4 in July. The unfilled orders index remained negative at -6.8 from -8.8 last month. The inventories index also remained negative at -9.7 from -10.8 last month, suggesting an on-going drawdown of inventories. The delivery time index was 1.9 this month, up from -6.9 in July and suggesting relatively steady delivery times. The employment index fell to -1.4 this month from 4.7 in July.

Pricing power improved modestly this month. The prices paid index rose to 25.2 from 16.7 in July. It had reached a high of 86.4 in April 2022. An increased 32.0% of respondents reported paying higher prices for inputs, while a lessened 6.8% paid less. The prices received index rose to 12.6 this month from a multi-month low of 3.9 in July. An increased 20.4% of respondents reported receiving higher prices, while a lessened 7.8% reported receiving lower prices.

The index of expected general business conditions in six months rose to 19.9 in August, its highest level in more than a year, and suggesting that firms expect improvement in overall business conditions. New orders rose to 28.1, shipments to 29.6 and employment to 24.9, all pointing to expectations of solid growth. Input prices paid are expected to rise but to remain sharply below their January 2022 highs. Expected prices received softened moderately. The expected capital expenditures reading rose 11 points to 13.6, pointing to improved capital spending plans.

The N.Y. Fed survey data are contained in Haver’s SURVEYS database. The expectations series is in Haver’s AS1REPNA database.