The New York Federal Reserve Bank’s Empire State manufacturing index plummeted to a reading of 2.3 in June, down nearly 15 points from the May index reading of 17.1. The consensus estimate had called for a drop of 4.3 points to 12.8. A reading above zero indicates that the economy is expanding.
The slaughter was greatest in the prices-paid index, which fell -19 points, and the prices received index fell nearly as much, down -11 points. The new orders index was down -6 points to 2.2 and the shipments index also fell -19 points to 4.8.
The survey’s index on future general business conditions fell for the fifth consecutive month, indicating growing worries over the strength of the US economy. Other future indexes also fell: the future new orders index dropped -15 points to 15.5 and the future shipments index fell -13 points to 12.4.
A bit of good news came in the index reading for expected number of employees in the next six months. The reading rose about 4.5 points to 16.5. The index for capital spending also rose slightly to 21.7.
In a supplement to the report, the NY Fed noted that 43% of respondents said that capital spending would increase in the next six months, while just 16% planned to cut spending. The major factor behind the growth in capex was high capacity utilization, which was cited by 44% of respondents.
That’s a positive signal because capacity utilization has been severely curtailed by the lack of demand. The big questions are how quickly demand will rise and how many jobs that new demand will create. There is some hope on these fronts, but that it is faint hope indeed.
The report is available here.