Empire State Manufacturing Survey
February 2008 Report

General Business Conditions

The Empire State Manufacturing Survey indicates that conditions for New York manufacturers deteriorated in February. The general business conditions index tumbled nearly 21 points to -11.7, falling below zero for the first time since May 2005. The new orders and shipments indexes also dropped into negative territory. The prices paid index rose for a second consecutive month, to its highest level in considerably more than a year, while the prices received index remained elevated but close to January’s level. Employment indexes dipped below zero. Future indexes were generally positive, but well below levels of late last year. In particular, future employment indexes posted significant declines, hovering just above zero.

In response to a series of supplementary questions on exchange rate changes (see Supplemental Report tab), manufacturers generally reported that the depreciation of the dollar had adversely affected their business: although the net effect of the weaker dollar on sales to foreign customers was positive, the effect on domestic sales was on balance somewhat negative. A majority of firms also noted that the change in the dollar exchange rate had negatively affected the prices they paid for materials and other inputs. In response to a separate set of questions, 43 percent of the firms surveyed reported that their customers had become slower in paying their bills, and 22 percent said that they were slower in paying their suppliers. Finally, roughly one in three respondents reported an increase in their own firms’ borrowing needs over the preceding three months, while 18 percent noted a decrease in credit availability.

Business Activity Declines
The general business conditions index fell nearly 21 points in February, to -11.7, the first negative reading for this measure since May 2005. Thirty-four percent of respondents—up from 19 percent in January—reported that conditions had worsened over the month, while 22 percent said that conditions had improved. The new orders index fell for a fourth consecutive month, dropping 12 points to -11.9. The shipments index also posted a sharp decline, falling 21 points to -4.9. The unfilled orders index fell slightly, to -1.0. The delivery time index rose modestly, to 0, and the inventories index also edged up to 0.

Pricing Pressures Pick Up, Employment Indexes Turn Negative
The prices paid index climbed for a second consecutive month, rising 7 points to 47.4, its highest level in more than a year; roughly half of the respondents reported paying higher prices. The prices received index held steady at 17.9. Employment indexes dipped below zero. The index for number of employees fell from 2.4 to -2.1 as the percentage of respondents reporting fewer employees outnumbered the percentage reporting more employees. The average workweek index also fell slightly, to 0.

Outlook Remains Subdued
After tumbling last month, future indexes remained generally positive but still well below levels of late last year. The future general business conditions index rose a few points to 22.7. The future new orders and shipments indexes also edged up, to roughly the same level as the future business conditions index. The future inventories index picked up from -3.7 to 12.6. The future prices paid index remained elevated, at 54.7, while the future prices received index held steady at a somewhat lower level, 27.4. The future index for number of employees fell sharply to 4.2. The capital expenditures index declined several points to 16.8, and the technology spending index also dipped to 16.8.

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