Empire State Manufacturing Survey: Activity Leveled Off

This morning we got the latest Empire State Manufacturing Survey. The diffusion index for General Business Conditions at -0.7 was a decrease of 32.6 from the previous month's 31.9. The Investing.com forecast was for a reading of 25.7.

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, 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 abruptly leveled off in New York State, according to firms responding to the January 2022 Empire State Manufacturing Survey. The headline general business conditions index fell thirty-three points to -0.7. New orders declined slightly, while shipments held steady. Delivery times continued to lengthen, and unfilled orders increased. Labor market indicators pointed to a moderate increase in employment and a longer average workweek. Both price indexes moved lower, but remained elevated. Plans for capital and technology spending were strong. Looking ahead, firms remained optimistic that conditions would improve 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 picked up in 2016, with a giant dip in 2020 due to COVID-19.

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