Business activity on New York’s factory floors picked up in May, according to a monthly survey from the Federal Reserve Bank of New York. The general business conditions index in the New York Fed’s May Empire State Manufacturing Survey jumped 10.5 points to 17.1. That indicates manufacturing activity expanded at a “moderate” pace, according to […]
Business activity on New York’s factory floors picked up in May, according to a monthly survey from the Federal Reserve Bank of New York.
The general business conditions index in the New York Fed’s May Empire State Manufacturing Survey jumped 10.5 points to 17.1. That indicates manufacturing activity expanded at a “moderate” pace, according to the New York Fed.
It also means the index has largely rebounded from a drop last month. The index skidded 13.3 points in April.
May’s survey results show that 40.5 percent of manufacturers reported improving general business conditions. Another 23.4 percent said conditions worsened, and 36.1 percent indicated conditions remained the same as last month.
“Most companies are doing very well,” says Robert Trachtenberg, the president and CEO of the Central New York Technology Development Organization (TDO), a not-for-profit consulting and training organization that focuses on helping manufacturing and technology companies.
“They’re exceeding previous performance,” Trachtenberg says. “It’s not the current business conditions that are concerning them.”
New orders picked up speed, with the survey’s new-orders index climbing 1.8 points to 8.3. And shipments spiked, as the shipments index sailed up 17.7 points to 24.1.
The unfilled orders index rose slightly, increasing 2.4 points to -4.8. The negative result shows that more manufacturers had a lower number of unfilled orders in May than had higher unfilled orders.
Delivery times fell, according to the delivery-time index, which dropped 4.8 points to 0. Inventories grew, as reflected by the inventories index increasing 3.6 points to 4.8.
Manufacturers continued to report increases in the prices they pay and the prices they receive. However, both the prices-paid index and prices-received index dropped in May, showing that the rate of price hikes slowed.
The prices-paid index dipped 8.4 points to 37.4. The prices-received index slid 7.2 points to 12.1.
Hiring stepped up slightly, according to the number-of-employees index. It rose 1.2 points to 20.5 in May. Employees also worked slightly longer hours than last month, as May’s average employee-workweek index moved up just over 6 points to 12.1.
Future expectations
Manufacturers slowed their production of optimism for the future, according to the survey’s forward-looking indicators, which measure expectations for a time six months into the future.
The survey’s future general business conditions index tumbled 13.9 points to 29.3. Even so, more respondents expected improved business conditions in six months — 47.6 percent — than anticipated worse conditions — 18.3 percent. The remaining 34.1 percent of survey respondents predicted conditions will be about the same as they are now.
Manufacturers also pulled back on predictions for higher orders and shipments. The future new-orders index skidded 15.7 points to 30.1. The future shipments index sank 19.3 points to 25.3.
The future unfilled-orders index eroded 9.6 points to 0, and the future delivery-time index crept up 1.2 points to 2.4. The future inventories index plunged into negative territory, losing 15.7 points to -10.8, showing that manufacturers predict lower inventories in six months.
Prices will still be climbing in six months, according to the survey. The future prices-paid index rose 7.2 points to 57.8, while the future prices-received index registered 22.9, unchanged from last month.
Survey respondents predicted increased hiring in six months, but cut back on their projected staffing increases from previous survey results. The future number-of-employees index shed 15.7 points to 12.1. Meanwhile, the future average employee-workweek index dipped 2.4 points to 8.4.
Staffing is becoming more difficult for manufacturers, according to Trachtenberg.
“The skills available and the skills required just don’t seem to match each other,” he says. “Getting unskilled workers is not a problem at all. But getting math skills and engineering skills is getting very competitive.”
Planned capital expenditures took a hit as well. The future capital-expenditures index descended 12.1 points to 19.3. And the future technology-spending index declined 6 points to 12.1.
“That has to do with the uncertainty of the economy,” Trachtenberg says. “A lot of companies right now are doing well, but they’re nervous about the future, so they’re holding back on some of their high-tech investments.”
Year-to-year price changes
This month, the New York Fed asked survey respondents to compare prices on a yearly basis.
Manufacturers reported that the prices they pay have increased by an average of 3.6 percent in the last 12 months. That’s lower than the increases they reported in May 2011, when they said prices had climbed an average of 8.1 percent in the previous 12 months.
Prices will likely continue to rise at the same rate in the next year, according to the survey. Manufacturers predicted the prices they pay will rise an average of 3.5 points in the next 12 months — down from an average 5.6 percent increase they predicted in May 2011.
Selling prices haven’t gone up as quickly, manufacturers said. They reported their average selling prices have increased by an average of 1.7 percent over the last 12 months, down from a 1.9 percent average reported in May of last year.
Manufacturers also said they expect their selling prices to jump 2.1 percent, on average, in the next 12 months. That’s lower than the predictions they made in May 2011, when they said their prices would probably rise 3.6 percent.
The New York Fed polls a set pool of about 200 New York manufacturing executives for the monthly survey. About 100 executives typically respond, and the Fed seasonally adjusts data.