New York Manufacturing Slumps Again
New York’s manufacturing sector faced another difficult month, marking a consistent four-month decline according to the recent Empire State Manufacturing Survey released by the Federal Reserve Bank of New York. The general business conditions index fell sharply to -16.0 in June, emphasizing the continued contraction in regional economic activity. Despite the deteriorating conditions, there is a silver lining as firms showed a notable upward shift in optimism about the future, indicating hopes for a turnaround.
The survey, which collected responses between June 2 and June 9, revealed ongoing weakness across several critical metrics. New orders fell to -14.2, highlighting an increasingly subdued demand environment, while shipments stagnated near zero, reinforcing the narrative of sluggish growth. Persistent supply chain disruptions lingered as the supply availability index remained negative at -8.3, underscoring manufacturers’ continued struggles to source essential inputs. Notably, input costs showed signs of relief as the prices paid index dropped significantly by 12 points, yet remained elevated at 46.8, suggesting inflationary pressures are far from abating fully.
Despite the challenging landscape, employment showed rare improvement, with the number of employees index climbing ten points to a modest 4.7, marking its first positive reading since January. However, the average workweek index hovered around -1.5, suggesting companies remain cautious and are hesitant to increase employee hours in an uncertain economy. Economic Research Advisor Richard Deitz of the NY Fed summarized the situation, saying, “Business activity continued to contract in New York State in June. However, employment grew slightly for the first time in several months.”
Manufacturers responded to persistent higher input costs and limited supply by raising their selling prices. The prices received index edged up to 26.6, reflecting companies’ attempts to offset the pressures of ongoing inflation and input shortages. Such pricing strategies indicate businesses are struggling to maintain profitability amidst persistent economic headwinds, highlighting the continuing inflationary environment despite recent claims of easing pressures.
While optimism regarding future conditions is encouraging, recent patterns of continued high inflation and supply chain disruptions suggest caution is warranted. With manufacturing activity still contracting and inflationary pressures persisting, businesses and investors alike may find increased value in stable stores of wealth, such as precious metals, as prudent hedges against ongoing economic uncertainty.
