In a concerning turn of events, the manufacturing landscape in New York has shown less activity than anticipated for August, with recent reports indicating a negative surprise from the US Mid-Atlantic region. The data complexity arises from two pivotal reports released on Thursday, shedding light on new orders and shipments that have experienced declines.
The Federal Reserve Bank of New York shared insights from the Empire State Manufacturing Survey. Notably, the general business conditions index improved slightly to minus 4.7 in August, compared to minus 6.6 in July. This outcome, however, fell short of consensus expectations, which anticipated a stable minus 6 reading according to a survey compiled by Bloomberg.
New orders encountered a significant slump, dropping to minus 7.9 from a negligible minus 0.6 in the previous month, indicating a potential slowdown in demand. Meanwhile, shipments displayed a decline as well, decreasing from 3.9 to 0.3. Additionally, the index reflecting the number of employees showed improvement, advancing to minus 6.7 from minus 7.9, yet it still underscores ongoing labor challenges.
Richard Deitz, the Economic Research Adviser at the New York Fed, remarked, "Labor market conditions remained weak, with a small decline in employment and a sharp drop in hours worked." Nonetheless, there persists a flicker of optimism among firms, as many hold onto hope for improving conditions in the coming months.
Looking ahead, the index capturing general business conditions six months into the future decreased by 2.9 points to reach 22.9 in August. Encouragingly, the future new orders index rose by 4 points to 24.8, indicating some potential for recovery, even as the shipments index fell by 3.2 points to land at 22.1.
This paints a mixed picture regarding employment growth in the near term. In a parallel development, the Philadelphia Fed announced a substantial swing in the Manufacturing Business Outlook Survey for the Mid-Atlantic region, where the headline gauge for business activity turned negative, dipping to minus 7 in August, in stark contrast to the 13.9 recorded the prior month.
This downturn represents the first negative reading since January of this year, as indicated by a survey compiled by Bloomberg, which had projected a positive 5.2 print. The new orders index echoed a downward trend, falling from 20.7 to 14.6, while shipments experienced an even sharper decline, plummeting to 8.5 from 27.8.
Alarmingly, the employment index suffered a notable plunge, dropping to minus 5.7 from a previous 15.2. Data acknowledging the general activity from firms reveals that almost 18% noted increases in activity in August, a significant drop from 39% the prior month. Conversely, 25% reported declines, stabilizing from July's figures.
The remaining percentage, some 53%, indicated no change in activity, reflecting a notable rise from 29%. When projected six months ahead, the expectations for general activity faltered significantly to 15.4, compared to 38.7 last month. Components regarding future new orders and shipments also faced declines, with the new orders component tumbling to 10.4 from 31.3 and shipments shrinking to 9.8 from 31.
The Philly Fed's survey concluded with 37% of firms expecting increased activity, while 21% anticipated declines, revealing a cautiously watchful optimism in a landscape clouded by uncertainty..