New York Fed’s Manufacturing Survey Reveals Second Worst Crash Ever

The Federal Reserve Bank of New York released Monday a survey showing that New York’s business activity experienced a sudden and severe decline in August.

The New York Fed’s Empire State Manufacturing Survey index of general business conditions plunged 42.4 points to negative 31.3.

This is the second-largest monthly drop in recorded data and one of the lowest levels ever seen in survey history. The worst were March and April 2020, and February and March 2009.

Economists had expected the index to dip to 5 from 11 in July.

The index for new orders dropped 35.8 points to negative 29.6, the lowest reading for this gauge outside of the lockdown period of March through May 2020. The index for shipments fell 49.4 points to negative 24.1. This is a sign of a significant decline in orders and shipment.

Unfilled orders dropped 12.7 points to negative 7.5, the third consecutive decline. The inventory index dropped to 6.4, which indicates that delivery times have increased slightly.

Given the drop in demand it’s not surprising that delivery times remained steady. Delivery times were stable for the first time since two years.

The prices paid index fell but was still high, suggesting a slowdown in the rise of input costs. Inflationary pressures remain constant on the sales side, even with the decline in demand. The price received index remained stable.

The index for the number of employees fell 11 points to 7.4, suggesting only a small increase in employment. This indicates a decrease in hours worked.

The index for future business conditions was 2.1. This indicates that the manufacturers aren’t optimistic about their six-month outlook. According to the New York Fed, only modest increases are expected in technology and capital spending. Expectations are for employment to increase and delivery times to decrease. Six-months ago, the indexes of new orders and shipment were both positive, but very low.

The New York Fed survey can be used as an indicator of manufacturing conditions in America. On Thursday the Philadelphia Fed will publish its index. Forecasts by economists issued prior to the New York Fed’s surprisingly deep plunge were for an improvement in the Philly Fed index from a negative 12.3 in July to negative five in August.

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