Sentiment Gauge Among New York Manufacturers Drops Below Zero for Only 4th Time In History

Indicative of industry's gloomy outlook

A worker at a newly renovated Ford's Assembly Plant in Chicago in 2019. (Jim Young/AFP via Getty Images)

Manufacturing activity in New York State is expected to decline over the next six months, according to the the New York Fed’s Empire State Manufacturing Survey released on July 15.

Economists rely on the index and other regional manufacturing gauges for an early read on factory activity.

Manufacturing in New York rose a modest 12.3 points to 11.1 in July, after analysts expected a third straight negative growth this month, according to The Wall Street Journal.

However, the index for future business conditions for the next six months plunged 20 points to negative 6.2—a sentiment expressed only three times in the survey’s history (pdf).

Of the respondents, 34 percent reported that conditions had improved over July, while 23 percent reported that conditions had worsened.

Decelerated July

Meanwhile, though price increases still remain elevated, they decelerated significantly in July.

The prices paid index fell fourteen points to 64.3, while the prices received index fell 12 points to 31.3.

The new orders index rose 0.9 points to 6.2 in July and are not expected see much of an increase, while the shipments index surged significantly by 21.3 points to 25.3, new shipments are only expected to be slightly higher.

Unfilled orders fell 0.9 points to negative 5.2 points, as the delivery times index fell to their slowest pace for a second month, declining 6 points to 8.7 as inventories picked up—the slowest pace in over a year.

The inventories index remained stable at 14.8, showing signs of expansion.

The post-pandemic restocking cycle is beginning to slow down, but a decline in order activities may lead to reduction in manufacturing activity.

The June, the ISM national manufacturing index fell to a two-year low of 53.5, as new orders dropped for the first time since May 2020.

The July ISM reading will be released in early August.

The capital spending and technology spending indexes dipped, but remain in the positive range.

Labor market indicators held firm at 18.0, pointing to a solid increase in employment, and a slightly longer average workweek at 4.3.

The U.S. economy has been showing signs of slowing down since the first quarter, putting additional pressure on the Federal Reserve to raise interest rates to combat high inflation.

The Fed announced that it is attempting to slow growth by discouraging consumers and businesses from spending or investing as much with higher rates to keep prices under control.

Central bank policymakers are expected to approve another rate hike after its next FOMC in late July, by as much as a full percentage point—the largest such increase since 1994.