U.S. Empire State Manufacturing Index Recovers in February

The General Business Conditions Index from the Federal Reserve Bank of New York rose to 5.7 this month from -12.6 in January, after falling from 2.1 in December. The Action Economics Forecast Survey expected a reading of -3.0 for February. The percentage of respondents reporting an improvement in business conditions rose to 26.9% in February from 24.2% in January while the percentage reporting a decrease backpedaled to 21.2% and more than retraced its increase to 36.8% in January. The survey responses were collected between February 3 and February 11.

The headline index reflects the answer to a single question concerning the state of economic activity. Haver Analytics calculates a composite index from the five major components, which is comparable to the ISM manufacturing index. The reading rose to 53.6 this month and more-than-reversed its January decline to 50.0. A level of 50 is the breakeven point between expansion and contraction. The index is the average of five diffusion indexes: new orders, shipments, employment, supplier deliveries and inventories with equal weights (20% each).

Increases in the new orders and shipments indexes led the component improvement in February. The new orders index rose to 11.4 after falling to -8.6, as a greater 31.8% of respondents reported increases in orders and a lessened 20.3% indicated declines. The shipments index rose to 14.2, its highest point in three months, after falling to -1.7 in January. A slightly lessened 29.2% of respondents reported increases as a halved 15.1% indicated shipments declines. Unfilled orders improved to 1.1, its first positive reading since September, after rising to -4.7 in January. The inventories index rose to 8.7 this month after falling to 5.8 in January. The delivery times index edged up to -5.4 after surging to 3.5 in January, suggesting the shortest delivery times in nearly three years.

The employment reading deteriorated in February, but the length of the workweek shortened. The jobs index declined to -3.6 this month after rising to 1.2 in January. A lessened 7.6% of respondents reported an increase in employment while a little-changed 11.3% reported a decline. The average workweek index improved to -1.2 from -15.1 in January. It was the highest reading in three months.

Inflation indicators strengthened in February. The prices paid index surged to 40.2, its highest reading in just under two years, from 29.1 in January. Forty-one percent of respondents reported paying higher prices last month versus 31.4% in January while a lessened 1.1% reported paying lower prices. The prices received index jumped to 19.6, the highest level in nearly two years, from 9.3 in January. A greater 23.9% received higher prices while a lessened 4.3% paid lower prices.

Firms were significantly less optimistic that business conditions would continue to improve in the months ahead. The future business activity index plunged to the lowest level (22.2%) since May 2024 with a greatly reduced 43.2% of respondents expecting conditions to improve over the next six months, down from 53.3% in January. Expected growth in orders, shipments, inventories & order backlogs each fell versus January. The employment reading fell to its lowest point since July but hours worked reading remained strong. The expected prices paid index continued to rise, to its highest point in roughly three years, while prices received remained strong. Capital spending plans weakened moderately.

The headline index reflects the answer to only one question concerning general business conditions and is not calculated from the components. The indexes in this report are diffusion indexes and measure the percentage of respondents indicating an increase minus the percentage indicating a decrease with zero separating expansion from contraction.

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