Decline of business activity statewide slows

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Business activity statewide has edged downward again, two Federal Reserve Bank of New York surveys indicate, but the decline eased and optimism about the future is trending higher.

After a sharp contraction a month ago, manufacturing activity in New York shrank further, according to the February Empire State Manufacturing Survey.

Though manufacturing activity is expected to grow within the next six months, optimism among New York’s manufacturers responding to the monthly survey was restrained. The responses were collected Feb. 2-9.

The general business conditions index rose 41 points but remained negative (-2.4). New orders also were negative (-6.3), though they increased 43 points, while unfilled orders continued to decline along with shortened delivery times. Inventories shrank as well. Shipments rose by 34 points to 2.8. 

“Manufacturing activity continued to edge slightly lower in New York State after contracting sharply in January, and price increases picked up. Firms’ optimism remained subdued,” says Richard Deitz, economic research advisor at the New York Fed.

The index for future business conditions was up three points to 21.5. However, the capital spending index was little changed at 11.7, suggesting softness in plans for spending on fixed assets such as buildings and equipment. 

Manufacturing employment held steady statewide. The average workweek index was -4.7, signaling a decline in hours worked. For the second consecutive month, the prices paid index rose higher–10 points–to 33. The prices received index also increased, rising eight points to 17. 

In the service sector, meanwhile, activity continued to decline modestly, the NY Fed’s business leaders survey indicates. The survey–also conducted Feb. 2-9–covers service firms in New York, northern New Jersey, and southwestern Connecticut.

For the sixth consecutive time, the business activity index remained negative, up two points to -7.3. The business climate index rose six points to -24.2, suggesting the business climate remains worse than normal, though to a lesser extent than last month, the survey states. 

Roughly a quarter of respondents (24 percent) reported that conditions improved over the last month, while 32 percent said they had worsened. The business climate index rose six points but remained negative, at -24.2.

Wages increased in the service sector while employment stayed steady. The wages index rose five points to 46.7. Employment is expected to grow. The prices paid index rose 5 points  at 50.6 and the prices received index remained at 24.5. Capital spending increased; the index edged up to 7.9. 

Looking ahead, business leaders were more optimistic than they have been in nearly two years. The business climate is expected to be better than normal in six months.

The index for future business activity climbed six points to 30.1 and the index for the future business climate rose 10 points to 15.2, suggesting that firms were increasingly optimistic about future conditions, the survey states. Both indexes were at their highest levels in nearly two years. 

“Business activity declined for a sixth straight month in the New York-Northern New Jersey region’s service sector while employment was flat,” Deitz notes. “However, optimism about the six-month outlook reached its highest level in nearly two years, showing that firms anticipate improvements to come. ”

Smriti Jacob is Rochester Beacon managing editor. The Beacon welcomes comments and letters from readers who adhere to our comment policy including use of their full, real name. Submissions to the Letters page should be sent to [email protected]

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