Empire State Manufacturing Survey: Activity Continued to Decline Modestly in July

Manufacturing activity continued to decline modestly in New York State, according to the Empire State Manufacturing July survey. The diffusion index for General Business Conditions fell to -6.6 from -6.0 in June. The latest reading was worse than the forecast of -5.5.

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 modestly in New York State, according to firms responding to the July 2024 Empire State Manufacturing Survey. The headline general business conditions index was little changed at -6.6. New orders remained steady, while shipments inched just slightly higher. Delivery times shortened, and supply availability was unchanged. Inventories moved lower. Labor market conditions remained weak, with employment continuing to contract. Input prices increased modestly while selling price increases were quite minor. Firms were fairly optimistic that conditions would improve in the months ahead.

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 -9.4, the highest level of the year.

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.