Empire State Manufacturing Survey

August 2010 Report

Survey Indicators

Seasonally Adjusted

General Business Conditions

The Empire State Manufacturing Survey indicates that conditions improved modestly in August for New York manufacturers. The general business conditions index rose 2 points from its July level, to 7.1. The new orders and shipments indexes both dipped below zero for the first time in more than a year, indicating that orders and shipments declined on balance; the unfilled orders index was also negative. The indexes for both prices paid and prices received inched down, while employment indexes were positive and higher than last month. The six-month outlook weakened; though future indexes were generally still positive, many fell in August, with the notable exceptions of the future employment and capital expenditures indexes, which climbed after falling last month.

In a series of supplementary questions, manufacturers were asked about their capital spending plans. Looking ahead to the next six to twelve months, 37 percent of respondents indicated that they expected to increase capital spending relative to its level in the past six to twelve months, while just 13 percent planned reductions. Of those predicting increased capital spending, 27 percent noted that "a considerable fraction" of the increase reflected investment that had been postponed because of the recession; 41 percent of respondents had given this same response in a similar survey back in January. Another 46 percent of those surveyed this month attributed "some" of the spending increase to the recession. The most commonly cited factors behind increased investment were high expected growth in sales and a need to replace capital goods other than IT (information technology) equipment. The most widely cited factors behind steady or decreased capital investment in the current survey were low expected sales growth, low capacity utilization, and limited need to replace non-IT capital goods.

Growth in Business Activity Remains Modest
The general business conditions index inched up two points in August, to 7.1. Still close to its July value, the index reading suggested that business activity improved over the month, but at a very modest pace. Roughly 30 percent of respondents reported that conditions had improved, while 22 percent reported that conditions had worsened. The new orders index fell below zero for the first time in over a year, dropping 13 points to -2.7—an indication that, on balance, manufacturers saw orders decline slightly. Following this same pattern, the shipments index also moved below zero, dropping 18 points to -11.5. Since April, this index has fallen a cumulative 44 points. The unfilled orders index was in negative territory for a fifth consecutive month, but inched up 6 points to -10.0. The delivery time index rose to zero. The inventories index was positive again in August, but fell a few points to 2.9.

Price Indexes Fall, Employment Indexes Climb
Both price indexes declined. Continuing its downward trend for a third consecutive month, the prices paid index fell 5 points to 20.0, suggesting that the pace of input price increases slowed. The prices received index, at -2.9, remained negative for a second consecutive month, a sign that selling prices were slightly lower in August. Employment indexes were positive and higher than in July, indicating that employment levels and the average workweek expanded in August. The index for number of employees had fallen in June and July, but climbed 6 points, to 14.3, this month. The average workweek index had dipped below zero last month, but rose 17 points to 7.1.

Degree of Optimism Continues to Weaken
Future indexes were generally positive, indicating that manufacturers expected conditions to improve in the months ahead. Nevertheless, many indexes fell in August, a sign that the level of optimism was slipping, as it had for the past few months. The future general business conditions index fell 6 points to 35.7, a reading well below the levels observed earlier this year. The future new orders index dipped 3 points to 31.4, and the future shipments index retreated 6 points to 25.7. The future prices paid index dropped 11 points to 30.0, while the future prices received index increased to 22.9. Future employment indexes rose: the index for expected number of employees climbed to 20.0, and the future average workweek index advanced to 7.1 after dipping below zero last month. Reversing two months of decline, the capital expenditures index moved up 9 points to 22.9. The technology spending index rose to 8.6.