The April 2015 Empire State Manufacturing Survey, released today, points to continued weakness in New York’s manufacturing sector. The survey’s headline general business conditions index turned slightly negative for the first time since December, falling 8 points to -1.2 in a sign that the growth in manufacturing had paused. The new orders index—a bellwether of demand for manufactured goods—was also negative, pointing to a modest decline in orders for a second consecutive month. Employment growth slowed, too. The Empire Survey has been signaling sluggish growth since October of last year after fairly strong readings from May through September.
A number of factors may be contributing to this weakness. First, since mid-2014, the dollar has appreciated significantly, making imports cheaper for domestic consumers and U.S. exports more expensive for foreign consumers. Indeed, in January we asked our respondents how changes in the value of the dollar were affecting sales and profits (see our January Supplemental Survey Report). On net, respondents reported that the stronger dollar was hurting sales to foreign customers, though few said it was hurting domestic sales and many indicated they were benefiting from lower input prices. Still, because the stronger dollar may be reducing activity at firms with which manufacturers do business, the effects may be being felt indirectly. Second, the recent drop in oil prices is likely contributing to a decline in oil and gas investment, which may slow activity for manufacturers who produce equipment for that industry. On the positive side, however, many manufacturers are benefiting from lower oil prices. Third, the unusually snowy winter slowed activity for some firms in the region. In fact, last month, we asked our panelists about the effects of the harsh winter weather on their businesses, and nearly half said that bad weather had reduced revenues in January and February. With rough weather persisting well into March, some of the effects of this past winter may be lingering into April as reduced orders from prior months continue to work their way through the pipeline.
Note that the Empire Survey is not the only regional manufacturing survey that has been soft in recent months; surveys conducted by the Federal Reserve Banks of Philadelphia, Dallas, Kansas City, and Richmond have all given weak signals so far in 2015.
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.