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The Empire State Manufacturing Survey, released January 18 by the Federal Reserve Bank of New York, indicates that conditions for New York manufacturers improved in January. The general business conditions index rose 2 points to 11.9. The new orders index moved up 10 points to 12.4, and the shipments index surged 18 points to 25.4. After a sharp decline last month, the inventories index rose above zero. Employment indexes also climbed into positive territory. Both the prices paid and prices received indexes rose, pointing to an acceleration in both input prices and selling prices. Future indexes conveyed a high level of optimism, with the future general business conditions index advancing to a level not seen since early 2010, while future price indexes climbed to multiyear highs.
In a series of supplementary questions, respondents were asked about expected changes in the size of their firms' workforces and about the reasons for the changes. Slightly more than half of respondents indicated that they expected their workforce to increase in the year ahead, while just 15 percent predicted declines in the total number of workers. In last February's survey – when a similar question was asked – an even larger majority, 64 percent, predicted increases. The current results were slightly more positive for larger establishments (150 or more employees) than for smaller establishments. When those respondents intending to increase employment were asked to identify key factors underlying their plans, the vast majority (77 percent) ranked high expected sales growth as the most important. Conversely, the most widely cited factor restraining hiring plans was low expected sales growth (31 percent).
Business Activity Strengthens
In January, the general business conditions index rose 2 points to 11.9, its second consecutive positive reading since dipping below zero for a single month in November of last year. Thirty-three percent of respondents reported that conditions had improved over the month, while 21 percent reported that conditions had worsened. The new orders index rose 10 points to 12.4, and the shipments index shot up 18 points to 25.4. The delivery time index was unchanged at -6.3. After dropping 15 points into negative territory last month, the inventories index rose 20 points, to 4.2, suggesting that inventory levels increased in January after declining in December.
Both prices paid and prices received indexes were positive and markedly higher this month. The prices paid index rose 7 points to 35.8, its highest level in several months, with 41 percent reporting increased input prices. The prices received index advanced 12 points to 15.8, its highest level since late 2008; 20 percent of respondents boosted selling prices in January, up from 10 percent in December. Employment indexes climbed above zero, suggesting that employment increased this month after declining last month. The index for number of employees moved up 12 points to 8.4, while the average workweek index rose 17 points, to 2.1.
Very Favorable Outlook for the Months Ahead
Future indexes were at relatively high levels, suggesting that manufacturers widely expected conditions to continue improving over the next six months. The future general business conditions index rose 10 points to 59.0, with 61 percent of respondents expecting conditions to be better in six months. The future new orders and shipments indexes remained at similarly high levels. The future inventories index rose 16 points to 14.7, a record high, indicating that inventory levels were expected to increase in the near future as business activity improved. Future price indexes, already elevated, inched higher – a sign that respondents expected both input prices and selling prices to accelerate. Future employment indexes, though slightly lower, were positive, indicating that employment levels were expected to continue increasing. The capital expenditures index moved up significantly, to 34.7, and the technology spending index edged up to 22.1.