Liberty Street Economics

« | Main | »

July 15, 2011

Just Released: July’s Empire State Manufacturing Survey Shows Ongoing Weakness in New York Manufacturing

Jason Bram and Richard Deitz

The July Empire State Manufacturing Survey, published today, indicates that manufacturing conditions continued to weaken in New York State. The survey’s headline index was -3.8, the second negative reading in a row, and suggested that, overall, manufacturing activity declined slightly in New York. Because the survey is a diffusion index, readings below zero indicate that more respondents reported worsening conditions than improving conditions. Lower (or higher) values of the index indicate more widespread decline (or improvement). The Empire State Manufacturing Survey is the first available indicator of manufacturing activity for the month. While it is entirely possible that what we are seeing is idiosyncratic to New York State, July’s report raises questions about whether the manufacturing sector is experiencing a temporary bump in the road, or is headed toward a more sustained slowdown. In this post, we review some of the highlights of today’s report.

For most of the past two years, the survey has signaled strength in New York State’s manufacturing sector.  The headline index has now been below zero for two consecutive months, suggesting that activity has stopped expanding and may have contracted modestly. In contrast, the nationwide manufacturing index published by the Institute of Supply Management (ISM) ticked up in June after signaling a sharp slowdown in growth in May, presumably owing in large part to supply disruptions from Japan’s earthquake. (Note: National industrial production data for June will be released by the Federal Reserve Board of Governors later this morning, while July data will not be available until mid-August.)

Besides the headline index, the survey’s other business indicators are also somewhat disappointing. The new orders index remained slightly negative, suggesting that the pipeline of demand is not growing. The shipments index and the index for number of employees hovered just above zero, and the average workweek index dropped well below zero. On the pricing front, although survey respondents reported that both input prices and selling prices rose, the pace of increase slowed. This is the second consecutive month that these indexes have indicated decelerating prices.

Supplemental questions, which spotlight different topics each month, focused on capital spending plans. On balance, firms indicated that they are spending more this year than in 2010 on computer and other capital equipment, but are investing less in structures. In addition, the median firm plans to spend about 14 percent less overall on capital this year than last.

The survey also asks respondents to gauge expected activity over the next six months. These forward-looking indicators suggest that activity is expected to improve in the months ahead, but the level of optimism has fallen markedly from the first half of the year.

All in all, July’s report is not very encouraging. However, it remains to be seen whether the manufacturing sector is facing a temporary lull, or encountering significant and persistent headwinds. It will be particularly important to monitor other July manufacturing data over the next couple of weeks, including regional manufacturing surveys from the Federal Reserve Banks of Philadelphia, Dallas, Kansas City, and Richmond, as well as the ISM’s national manufacturing survey.

The views expressed in this post are those of the author(s) and do not necessarily reflect the position of the Federal Reserve Bank of New York or the Federal Reserve System. Any errors or omissions are the responsibility of the author(s).

About the Blog

Liberty Street Economics features insight and analysis from New York Fed economists working at the intersection of research and policy. Launched in 2011, the blog takes its name from the Bank’s headquarters at 33 Liberty Street in Manhattan’s Financial District.

The editors are Michael Fleming, Andrew Haughwout, Thomas Klitgaard, and Asani Sarkar, all economists in the Bank’s Research Group.

Liberty Street Economics does not publish new posts during the blackout periods surrounding Federal Open Market Committee meetings.

The views expressed are those of the authors, and do not necessarily reflect the position of the New York Fed or the Federal Reserve System.

Economic Research Tracker

Image of NYFED Economic Research Tracker Icon Liberty Street Economics is available on the iPhone® and iPad® and can be customized by economic research topic or economist.

Economic Inequality

image of inequality icons for the Economic Inequality: A Research Series

This ongoing Liberty Street Economics series analyzes disparities in economic and policy outcomes by race, gender, age, region, income, and other factors.

Most Read this Year

Comment Guidelines


We encourage your comments and queries on our posts and will publish them (below the post) subject to the following guidelines:

Please be brief: Comments are limited to 1,500 characters.

Please be aware: Comments submitted shortly before or during the FOMC blackout may not be published until after the blackout.

Please be relevant: Comments are moderated and will not appear until they have been reviewed to ensure that they are substantive and clearly related to the topic of the post.

Please be respectful: We reserve the right not to post any comment, and will not post comments that are abusive, harassing, obscene, or commercial in nature. No notice will be given regarding whether a submission will or will
not be posted.‎

Comments with links: Please do not include any links in your comment, even if you feel the links will contribute to the discussion. Comments with links will not be posted.

Send Us Feedback

Disclosure Policy

The LSE editors ask authors submitting a post to the blog to confirm that they have no conflicts of interest as defined by the American Economic Association in its Disclosure Policy. If an author has sources of financial support or other interests that could be perceived as influencing the research presented in the post, we disclose that fact in a statement prepared by the author and appended to the author information at the end of the post. If the author has no such interests to disclose, no statement is provided. Note, however, that we do indicate in all cases if a data vendor or other party has a right to review a post.