Empire State Manufacturing Survey

The monthly survey of manufacturers in New York State conducted by the Federal Reserve Bank of New York.

December 2007 Report

General Business Conditions

The Empire State Manufacturing Survey suggests a marked deceleration in manufacturing activity in December. The general business conditions index plummeted 17 points, to 10.3. The new orders and shipments indexes, while positive, also posted notable declines, and the unfilled orders index fell well below zero. The prices paid index eased slightly, and the prices received index held steady. The index for number of employees was modestly positive, while the average workweek index fell into negative territory for the first time since January. Future indexes were positive, but the degree to which activity is expected to expand over the next six months remained low compared with expectations earlier this year.

Supplementary survey questions—identical to those included in the December 2006 survey—asked manufacturers to quantify the change in the prices they paid for a number of major inputs, or budget categories, in 2007 as well as the expected change in those prices in 2008. On average, respondents indicated that prices paid for goods and services overall rose by 6.5 percent in 2007; they anticipated a virtually identical increase in 2008. Manufacturers expected a hike of 4 percent for wages and 7.5 percent for employee benefits in 2008—increases that slightly exceeded those reported for 2007. Energy costs were expected to jump nearly 8 percent, while the costs of other commodities were seen rising by a little more than 5 percent; these increases were somewhat smaller than those reported for 2007.

Business Activity Levels Off
The general business conditions index fell sharply in December, dropping 17 points to 10.3. Thirty-five percent of respondents reported that conditions had improved, while 24 percent reported that conditions had deteriorated. The new orders index also declined markedly, falling 10 points to 14.3, and the shipments index fell 11 points to 21.1. The unfilled orders index declined 9 points, to -10.0. The delivery time index rose to 5.0, and the inventories index fell to -10.0.

The prices paid index eased several points but remained elevated at 35.0. The prices received index held steady at 12.5. At 12.8, the number of employees index was little changed, while the average workweek index dropped sharply to -7.5, its lowest reading in considerably more than a year.

Outlook Remains Subdued
Future indexes were positive, but remained at the lower levels observed in November. The future general business conditions index held steady at 32.4. The future new orders and shipments indexes declined but remained positive, while the future unfilled orders index fell below zero. The future prices paid index dipped several points but remained elevated at 55.0, while the future prices received index, at 29.9, adhered to its level of the past several months. Future employment indexes were positive. The capital expenditures index increased 5 points, to 23.8, and the technology spending index rose to 15.0.


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