Empire State Manufacturing Survey: Activity Edged Higher in February

Manufacturing activity edged higher in New York State, according to the Empire State Manufacturing February survey. The diffusion index for General Business Conditions climbed 18.3 points to 5.7. The latest reading was better than the forecast of -1.9.

Here is the opening paragraph from the report.

Business activity edged higher in New York State in February, according to firms responding to the Empire State Manufacturing Survey. The headline general business conditions index climbed eighteen points to 5.7. New orders and shipments grew moderately. Delivery times were slightly longer, and supply availability was slightly lower. Inventories continued to expand modestly. Employment levels moved lower. Input prices increased at the fastest pace in nearly two years, and selling price increases also ticked up noticeably. Though firms expect conditions to improve over the next six months, optimism about the outlook dropped significantly.

Background on the Empire State Manufacturing Survey

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, and below indicates worsening conditions. The reading is compiled from a survey of about 200 manufacturers in New York state.

Below is a chart of the current conditions and its 3-month moving average, which helps clarify the trend for this extremely volatile indicator. The current 3-month moving average stands at -1.6.

Empire State Manufacturing

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 rose back up in 2016, with a giant dip in 2020 due to COVID-19. The index quickly picked up again in 2021, declined for 2022, and gradually rose in 2023. The index kicked off 2024 with a sharp decline but rose during the back half of the year, reaching positive territory for the first time in over 2.5 years.