Business activity in New York state suffered a severe and unexpected crash in August, a survey released Monday by the Federal Reserve Bank of New York showed.
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 decline on record and among the lowest levels in the survey’s history. Only March and April of 2020 and February and March of 2009 were worse.
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 indicates a sharp decline in both orders and shipments.
Unfilled orders dropped 12.7 points to negative 7.5, the third consecutive decline. The inventories index fell to 6.4, indicating that delivery times increased marginally.
Given the plunge in demand, it is not surprising that delivery times held steady. This was the first time in two years that delivery times did not worsen.
The prices paid index moved lower but remained elevated, pointing to a deceleration in input price increases. The prices received index held steady, indicating no let up in inflationary pressures on the sales side despite the crash in demand.
The index for the number of employees fell 11 points to 7.4, suggesting only a small increase in employment. The workweek index dropped, indicating a decline in the hours worked.
The index for future business conditions came in at 2.1, showing that manufacturers are not optimistic about the six-month outlook. Only modest increases in capital spending and technology spending are planned, the New York Fed said. Employment is expected to pick up and delivery times to decline. The indexes for new orders and shipments six-months from now were positive but at very low levels.
The New York Fed’s survey is seen as a bellwether for manufacturing conditions in the U.S. On Thursday, the Philadelphia Fed will release 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.