The Empire State Manufacturing Survey indicates that conditions
for New York manufacturers improved slightly in May. The
general business conditions index inched up 4 points,
The new orders and shipments indexes also improved,
and the unfilled orders index rose to zero. The prices
paid index retreated from last month’s level but
remained elevated, while the prices received index rose
after three consecutive months of decline. Employment
indexes advanced moderately.
The future general business conditions index leapt
up 16 points, reaching a level not seen in well over
a year. The future prices paid and prices received indexes
also posted significant gains.
In a series of supplementary questions, identical to
questions posed in the June 2006 survey, manufacturers
were asked how much they expected the prices they paid
to change over the next six months; in addition, they
were asked to assess the probability that prices would
rise or fall by certain specified amounts. Responses
to the current survey indicated that the median expected
change over the next six months was a 3.0 percent increase—down
from a 4.0 percent rise in last year’s survey.
On average, manufacturers saw a 44 percent chance that
prices would rise by between 2 and 8 percent, and a
38 percent chance that prices would remain within 2
percent of their current levels. Price increases of
8 percent or more were given an average probability
of 13 percent. These figures suggest that the perceived
risk of upside price pressures has abated somewhat from
last year’s survey.
General Business Conditions Improve Marginally
The general business conditions index edged up 4 points
in May, to 8.0, but remained close to the low levels
of March and April. Twenty-six percent of respondents—roughly
the same percentage as in April—reported that
conditions had improved over the month, while the percentage
reporting worsening conditions dropped from 25 percent
to 18 percent. The new orders index also rose, to 8.0,
and the shipments index advanced 5 points to 14.1. The
unfilled orders index climbed to zero, and the delivery
time index dropped below zero. The inventories index
reversed a three-month rising trend that had peaked
last month at 7.1, dropping to zero.
Higher Prices Continue
Although the two price indexes moved in opposite directions
in May, both remained elevated. The prices paid index
dropped 6 points, to 34.4, indicating some easing of
price pressures; thirty-six percent of respondents reported
an increase in prices orgpaid, down from 44 percent
in April. The prices received index reversed course
after three consecutive declines, rising 8 points to
15.6. Employment indexes improved. The index for number
of employees increased to 9.7, and the average workweek
index rose to 11.1.
The future general business conditions index shot up
from 33.9 in April to 49.8 in May. Fifty-nine percent
of respondents expected conditions to improve over the
next six months, compared with 43 percent last month.
The future new orders index rose nearly 10 points, to
44.8, and the future shipments index climbed from 38.0
to 50.6. Respondents predicted that price increases
would intensify in the months ahead. The future prices
paid index rose 10 points, to 53.3, and the future prices
received index rose 19 points, to 36.7. Future employment
indexes remained positive. The capital expenditures
index increased to 34.4, and the technology spending
index advanced to 26.7.
Manufacturers Expect to Pay Higher Prices by
In a series of supplementary questions in the May survey,
manufacturers were asked to predict how much the prices
they paid would change over the next six months. The
same questions had been asked in June 2006.
In the current survey, the median expected price change
over the next six months was a 3 percent increase—down
from a 4 percent increase in last June’s survey.
Asked about the probability that prices would rise or
fall by certain specified amounts, respondents on average
estimated a 44 percent probability that prices would
rise by between 2 and 8 percent, compared with a 51
percent probability in the 2006 survey.
On average, manufacturers indicated a 13 percent chance
that prices would rise by 8 percent or more, down from
an 18 percent probability in last year’s survey.
Relatively stable prices—defined as staying within
2 percent of current levels—were viewed as more
probable in the current survey (38 percent chance) than
in last year’s survey (27 percent chance). Price
declines were seen as fairly improbable in both surveys.