Jason Bram and Richard Deitz
The July 2014 Empire State Manufacturing Survey, released today, points to some notable strengthening in New York’s manufacturing sector. The survey’s headline general business conditions index and the new orders and shipments indexes all climbed to their highest levels in more than four years. The employment measure also moved up in July and is close to the three-year high set in April. Because the survey’s diffusion indexes measure the breadth of change for their respective indicators, greater values tend to indicate not just higher levels of activity, but also a faster pace of growth, so today’s report is quite encouraging. This month’s Empire Survey suggests a fundamental improvement in New York State’s manufacturing climate that has now persisted for three months—a break from the winter doldrums of February, March, and April, when there were few signs of any growth at all. Some of the improvement over the past few months may reflect a bounce-back from the weak winter, but we are now getting past the point where this is likely to be the predominant factor. This provides a hopeful sign that we may see some of these positive trends reflected in hard data on statewide manufacturing employment, which looked quite weak during the first part of 2014.
How confident are New York’s manufacturers that this growth will continue through the second half of the year? The survey’s forward-looking indexes did decline in July, but they generally remain at pretty high levels. About 42 percent of those surveyed expect business activity to expand further over the next six months, while less than 15 percent expect it to contract. However, when asked about their expectations for employment, capital spending, and technology spending—three measures under a company’s control—respondents offered a mixed outlook: hiring plans remain fairly positive but investment plans were not quite so upbeat.
So are we finally seeing some true, sustained strength in New York’s manufacturing sector, and could this be a portent for the nation as a whole? Last month, regional manufacturing surveys from the Federal Reserve Banks of Philadelphia, Dallas, and Kansas City, all came in quite strong, and Richmond’s indicated at least some expansion in manufacturing activity. It remains to be seen whether these regional surveys in July will confirm New York’s strong report, and in addition, whether the good news will continue in the months ahead.
The views expressed in this post are those of the authors 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 authors.
Jason Bram is a research officer in the Federal Reserve Bank of New York’s Research and Statistics Group.
Richard Deitz is an assistant vice president in the Bank’s Research and Statistics Group.