U.S. Empire State Manufacturing Index Soars in November

The General Business Conditions Index from the Federal Reserve Bank of New York surprisingly soared to 31.2 in November from -11.9 in October. This is the highest reading since December 2021. The Action Economics Forecast Survey had expected an increase but only to -0.9. The percentage of respondents reporting an improvement in business conditions increased to 40.9% in November from 26.6% in the previous month while the percentage reporting a decrease plummeted to 9.7% from 38.5%. The survey responses were collected between November 4 and November 12.

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. That index jumped to 56.6 in November, its highest reading since July 2022 from 48.1 in October. 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).

New orders and shipments were the primary factors behind the November surge. The new orders index climbed thirty-eight points to 28.0 with 42.0% of respondents reporting an increase. The shipments index rose thirty-five points to 32.5 from -2.7 in October with 45.8% of respondents reporting an increase. Unfilled orders fell to -10.3 from -2.2. The inventories index climbed to 1.0 from -7.5, signaling that inventories levelled off. The delivery times index moved up to 3.1 from -3.2 in October, suggesting that delivery times were slightly longer, and the supply availability index remained in negative territory at -4.1, a sign that supply availability worsened slightly in November.

Employment deteriorated slightly in November while the workweek lengthened. The index for the number of employees declined to 0.9 from 4.1 in October, indicating that employment levels were little changed in November. Twelve percent of respondents reported an increase in employment vs. 12.7% in October while 11.2% reported a decline, up from 8.6% in October. By contrast, the average workweek index rose to 6.1, pointing to a modest increase in hours worked, from 4.7 in October.

Inflation indicators were mixed in November but remained modest. The prices paid index edged down to 27.8 from 29.0 while the prices received index edged up to 12.4 from 10.8. Twenty-eight percent of respondents reported paying higher prices in November vs. 33.3% in October while 14.4% reported receiving higher prices, down from 17.2% in October. Firms remained optimistic that conditions would continue to improve in the months ahead. After reaching a multi-year high last month, the index for future business activity edged down 5.5 points to a still-high reading of 33.2, with half of respondents expecting conditions to improve over the next six months. Growth of both orders and shipments are expected to slow from the October reading. Employment is expected to grow moderately. Capital spending plans continued to expand with its index rising to 13.4, its highest reading since January.

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.