Empire State Manufacturing Survey Unexpectedly Jumps to Highest Level in 9 Months

Worker at factory.
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Factory activity in New York picked up in February, with new orders, inventories, and prices all increasing.

The business conditions index of the Empire State Manufacturing Survey, put out by the Federal Reserve Bank of New York, jumped 8.1 points from January’s reading to 12.9.

That is the highest reading since May of last year and above the consensus forecast of between 4.0 and 4.5. It is also the second consecutive monthly “beat” for this gauge, indicating the manufacturing activity in the State of New York is experiencing a much stronger than expected recovery from the doldrums of last year.

The New York Fed’s gauge of manufacturing activity declined sharply at the end of 2018 as global demand waned due to sluggish economic conditions around the world slower growth in the U.S. It took a second dive in May of last year, briefly turning negative and indicating contraction, and then remained at low but still positive levels for the rest of the year.

The survey’s measures of new orders, unfilled orders, shipments, delivery time, inventories and prices received all increased, painting a picture of healthy demand and business confidence.

The gauge of prices paid declined, indicating very little inflationary pressure. The measure for the number of employees also fell but remained positive, suggesting that employment growth continues despite unemployment in New York falling to the lowest level in over thirty years and remaining at that ultra-low level for six months.

The average employee workweek fell to a reading of negative one, which is a bit of an outlier considering the strength elsewhere in the survey.

The index looking at expected general business conditions six months ahead dipped a bit after January’s very strong reading. In fact, all but one of the indicators looking six months ahead came in lower. Notably, expectations for prices paid and prices received were lower, which could complicate the Federal Reserve’s attempt to raise inflation to its two percent target. Expectations for payroll growth grew, implying that businesses expect to be able to keep filling positions despite the ultralow employment level.


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