Empire State Manufacturing Survey: Activity Continues to Decline in May

Manufacturing activity continued to decline in New York State, according to the Empire State Manufacturing May survey. The diffusion index for General Business Conditions fell to -15.6 from -14.3 in April. The latest reading was worse than the forecast of -9.9.

Background on the Empire State Manufacturing Survey

The Empire State Manufacturing Index rates the relative level of general business conditions in New York state. A level above 0.0 indicates improving conditions, and below indicates worsening conditions. The reading is compiled from a survey of about 200 manufacturers in New York state.

Here is the opening paragraph from the report.

Business activity continued to decline in New York State, according to firms responding to the May 2024 Empire State Manufacturing Survey. The headline general business conditions index was little changed at -15.6. New orders declined significantly, while shipments held steady. Unfilled orders continued to decline. Delivery times shortened, and inventories were little changed. Labor market conditions remained weak, with employment and hours worked continuing to move lower. The pace of input and selling price increases moderated slightly. Though firms expect conditions to improve over the next six months, optimism was subdued. [Full report]

Below is a chart of the current conditions and its 3-month moving average, which helps clarify the trend for this extremely volatile indicator. The current 3-month moving average is -16.9, down 4.4 points from last month.

Empire State Manufacturing

Since this survey only goes back to July of 2001, we only have two complete business cycles with which to evaluate its usefulness as an indicator for the broader economy. Following the great recession, the index has slipped into contraction multiple times, as the general trend slowed. We saw a gradual decline in 2015 that rose back up in 2016, with a giant dip in 2020 due to COVID-19. The index quickly picked up again in 2021, declined for 2022, and gradually rose in 2023. However, the index has kicked off 2024 with a sharp decline.