Manufacturing in New York State Slumps Even as Outlook Brightens
Manufacturing in the New York region slumped at the fastest pace since the depths of the last recession, a report from the Federal Reserve Bank of New York showed Aug. 17.
The central bank branch’s so-called Empire State index plunged to minus 14.9 in August, the lowest level since April 2009, from 3.9 the prior month. Readings less than zero signal contraction. Gauges of orders and sales also retreated.
A rising dollar that makes American goods more expensive for customers overseas is hurting exports, leaving factories with too many goods in stock. At the same time, New York manufacturers were the most optimistic about the future than at any time in the past four months, a sign the slowdown is likely to be short-lived.
“Weakness in the headline matched by broad-based weakness throughout the details suggests that something is going sour in the factory sector,” said Carl Riccadonna, chief U.S. economist at Bloomberg Intelligence in New York. “Either factories are being clobbered by an aggressive attempt to unwind inventories, which we know built up pretty substantially in the first and second quarters, or they’re facing a very significant downdraft from the strengthening of the dollar.”
Factories nationally had enough stockpiles on hand to satisfy 1.35 months’ supply given the current pace of sales, matching the highest since August 2009, according to data from the Commerce Department.
The New York Fed’s gauge of expectations six months from now climbed to 33.6 in August, the highest since April, the Aug. 17 report showed.
“The fact that six-month conditions are improving, to me, suggests that maybe it is just an inventory workdown and less due to the dollar because I don’t think businesses are expecting the currency to move in their favor any time soon,” Riccadonna said.
