The Empire State Manufacturing Survey is one of a myriad of regional business condition surveys put out monthly or quarterly by a variety of Federal Reserve Bank branches, college and University economic departments, or business groups. Most of these surveys track current and expected business conditions for firms operating in a specific geographic area. This index is based on a survey distributed to roughly 175 manufacturing executives in New York State and asks questions intended to gauge both the current sentiment of the executives and their six-month outlook on the sector.
In May, the index turned negative for the first time since January, suggesting that a marginal contraction occurred in the state’s manufacturing sector last month. New orders also turned negative but only slightly, at minus 1.17 in May vs plus 2.20 in April. Unfilled orders are contracting at a deepening rate, delivery times are shortening, inventories are falling, and price pressures are easing — all consistent with slow conditions.
Indexes for the six-month outlook were generally lower this month, indicating that optimism about future conditions had slipped. According to the Bank, the future general business conditions index declined for a second consecutive month, dropping six points to 25.5. The future new orders index fell seven points to 28.8, and the future shipments index fell fourteen points to 25.2.
Overall employment indices remained about flat, showing both a modest increase in the number of employees and a slight decline in the length of the average workweek. All in all, the Empire State index suggest little excitement or growth in the Nation’s third largest state economy. This is consistent with most of the other regional indices – particularly those from the northeast. The overall state of the economy remains soft, with most activity sitting in neutral. This does not bode well for hiring, and suggests that employment levels, wage rates and savings will continue to be sub par, much like a old style tin toy that has wound down.
Considering that the economy is in its third year of recovery and that recessions generally occur every eight years or so this does not bode well for the future business cycle. Employment levels have not reached their pre 2008 levels and may not do so until the country is on the verge of the next recessionary cycle. This pessimistic forecast is keeping businesses in New York and throughout the country cautious about making new investments, or ramping up production.