Empire State Manufacturing Survey: Contraction Continues in March

This article was originally written by Doug Short. From 2016-2022, it was improved upon and updated by Jill Mislinski. Starting in January 2023, AP Charts pages will be maintained by Jennifer Nash at Advisor Perspectives/VettaFi.

This morning we got the latest Empire State Manufacturing Survey. The diffusion index for General Business Conditions dropped 18.8 points from last month to -24.6. This morning's reading was far below the Investing.com forecast of -8.0. This month's reading marks the fourth consecutive month in contraction territory.

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. This month's responses were collected between March 2-9th.

Here is the opening paragraph from the report.

Business activity continued to decline in New York State, according to firms responding to the March 2023 Empire State Manufacturing Survey. The headline general business conditions index fell nineteen points to -24.6. New orders dropped significantly, and shipments declined modestly. Delivery times shortened for a second consecutive month, suggesting supply availability improved, and inventories were steady. Both employment and hours worked declined for a second consecutive month. Input and selling price increases slowed somewhat. Looking ahead, businesses expect little improvement in conditions over the next six months. [Full report]

Here is a chart of the current conditions and its 3-month moving average, which helps clarify the trend for this extremely volatile indicator:

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 but has been declining since the start of 2022.

Here is an overlay of the current and future conditions (a six-month outlook).

The index for future business conditions fell twelve points to 2.9, suggesting that firms do not expect activity to improve much over the next six months. New orders and shipments are expected to increase modestly, and employment is expected to be somewhat higher. The index for future prices paid fell a steep eighteen points, suggesting that, looking ahead, firms expect slower input price increases than they were anticipating last month. The capital spending index and technology spending index both fell to 13.3.

Meanwhile, here's another look at the latest ISM Manufacturing Business Activity Index.

Let's compare all five regional manufacturing indicators. Here is a three-month moving average overlay of each since 2004 (for those with data).

Here is the same chart including the average of the five. Readers will notice the range in expansion and contraction among all regions.

Here are the remaining four monthly manufacturing indicators that we track:

Texas Manufacturing Outlook Survey (TMOS)

Kansas City Manufacturing Survey

Fifth District Manufacturing Survey (Richmond)

Philadelphia Fed Manufacturing Business Outlook Survey

Regional Fed Overview

Empire State Manufacturing Survey: Contraction Continues in March

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