Empire State Manufacturing Survey Improves in February but Still Weak

Manufacturing activity in New York State still decreased in February, but just barely, as the New York Federal Reserve Bank’s Empire State Manufacturing Survey results showed general business conditions at -2.4%, much less weak than January’s -43.7%. The February result was also less weak than the Action Economics Forecast Survey’s expectation of -15.0%. In the actual February results, the percentage of participants reporting an increase in general business conditions rose to 32.4% from 10.4% in January, while the percentage of participants reporting a decrease in activity fell to 34.8% from January’s 54.2%.

Haver Analytics constructs an ISM-Adjusted version of the survey results, which is comparable to the ISM manufacturing index. In February, this index rose to 48.4 from 39.7 in January. This latest move puts the index back exactly at its 2023 average, which indicated a very modest pace of decline in business conditions during that year.

In February, companies reporting higher shipments did rise on balance, with 34.4% of companies with higher shipments and 31.5% reporting decreases, so the net number with increases was 2.8%. All of the other “current indicators” had negative balances, which in this survey are referred to as diffusion indexes. The readings were, though, less negative than the very weak January amounts. So, in February, new orders increased at 33.0% of firms while they fell at 39.3%, giving an “index” of -6.3, compared with January’s -49.4. Unfilled orders increased at 16.0% of firms in February while they decreased at 25.5%, giving an index of -9.6, compared to January’s -24.2. Delivery times rose at 13.8% of firms in February and fell at 17.0%, giving a diffusion index of -3.2 after January’s -8.4. In February, inventories rose at 16.0% of firms and fell at 25.5%, giving an index of -9.6, following January’s -7.4.

The number of companies reporting changes in the number of employees was actually well balanced in February, with 12.6% of firms saying they had more employees and 12.7% with fewer employees. In January, 7.5% of firms had more employees and 14.4% with fewer employees. The average employee workweek increased at 16.3% of firms this month, while decreasing at 21.0%, for a balance of -4.7; that’s a modest improvement from the -6.1 in January.

Price pressures were somewhat more volatile in February. Prices received rose at 21.3% of firms while they decreased at just 4.3%, for a diffusion index of 17.0. In January the diffusion index was just 9.5. Prices paid were stronger, with 37.2% of firms reporting paying higher prices and just 4.3% of firms reporting paying lower prices, making a diffusion index of 33.0; in January, prices paid were strong at a sizable number of firms but less than the February numbers, so the diffusion index as 23.2.

Looking ahead, the expectations for general business conditions six months ahead saw a moderate increase from January to this month, with the diffusion index rising from 18.8 in January to 21.5 this month. The implications of the outlook for companies’ capital expenditures show a second month of firmer readings than was the case during most of 2023. In this month’s survey, 27.7% of companies expect their capital expenditures to increase six months ahead, a bit less than the 29.5% of companies in the January survey but higher than the average over the prior nine months of 24.0%. The overall diffusion index for capital spending six months ahead is 11.7, following January’s 13.7%, both more than the 2023 average of 10.2.

The latest survey was conducted between February 2 and February 9. The headline index reflects the answer to only one question concerning general business conditions and is not calculated from the components.

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