U.S. October Empire State Manufacturing Index (Text)

Following is the text of the Empire State Manufacturing Index.

The October Empire State Manufacturing Survey indicates that conditions for New York manufacturers continued to decline for a third consecutive month. The general business conditions index increased four points but remained negative at -6.2. The new orders index rose five points to -9.0, while the shipments index fell nine points to -6.4, its first negative reading in more than a year. The prices paid index was little changed at 17.2, and the prices received index held steady at 4.3. Employment conditions weakened, with the index for number of employees declining five points to -1.1 and the average workweek index falling three points to -4.3. Indexes for the six-month outlook suggested that conditions were expected to improve, although the level of optimism among manufacturers remained low relative to earlier this year.

In a series of supplementary questions, more respondents reported rising than declining borrowing needs over the past year, by a margin of 26 percent to 17 percent. Looking ahead to the next twelve months, 24 percent of manufacturers indicated that they expected borrowing needs to be higher a year from now, whereas just 10 percent anticipated lower borrowing needs. While the vast majority of respondents reported no change in credit availability--over either the past three months or the past twelve months--almost twice as many manufacturers reported tightening as easing in credit.

Business Conditions Continue to Worsen

The general business conditions index was negative for a third consecutive month in October, pointing to a continued deterioration in business conditions for New York manufacturers. The index rose four points to -6.2, with 25 percent of respondents reporting that conditions had improved over the month and 31 percent reporting that conditions had worsened. The new orders index climbed five points but, at -9.0, remained negative, indicating that orders were continuing to decline. The shipments index fell below zero for the first time in more than a year, dropping nine points to -6.4--a sign that shipments were lower. The unfilled orders index was slightly lower at -18.3. The delivery time index fell six points to -4.3, and the inventories index edged down to -2.2.

Employment Indexes Weaken

The indexes for both prices paid and prices received were little changed. At 17.2, the prices paid index remained near its level of the past few months, suggesting that moderate input prices increases were continuing. The prices received index held at 4.3, indicating a small increase in selling prices. The index for number of employees fell for a second consecutive month and, at -1.1, suggested that employment levels were essentially flat. Prior to September, this index had shown modest increases in employment throughout much of the year. The average workweek index fell three points to -4.3, signaling a shorter workweek.

Modest Improvement Expected in Months Ahead

Indexes for the six-month outlook generally suggested that firms expected conditions to improve, although the level of optimism remained significantly lower than the levels seen earlier this year. After rising last month, the future general business conditions index fell eight points to 19.4. The future new orders index inched down two points to 15.1, and the future shipments index was little changed at 11.8. The future prices paid index climbed for a second consecutive month, rising four points to 44.1. The future prices received index, at 24.7, held steady. The index for expected number of employees fell nine points to zero--a sign that employment was expected to be unchanged over the next six months. The future average workweek index fell fourteen points to -11.8, indicating that the average workweek was expected to be shorter. These two employment indexes were at their lowest levels in more than a year. The capital expenditures index fell six points to 6.5, its lowest level since mid-2009, and the technology spending index held steady at 7.5

Supplemental Report: Manufacturers Anticipate Increased Borrowing Needs, See Slight Decline in Credit Availability Supplementary questions in the October 2012 Empire State Manufacturing Survey focused on recent and expected changes in firms’ borrowing needs and credit availability. Parallel questions had been asked in previous surveys-- most recently, in the March 2012 and October 2011 surveys.

As in these earlier surveys, a majority of respondents in the latest survey reported no change in borrowing needs. Still, the share of respondents reported rising borrowing needs over the past year exceeded the share reporting declining needs: 26 percent said that their borrowing needs had increased in the past year, while just 16 percent said they had decreased. This breakdown is almost identical to that in March’s survey. When asked about changes over the past three months, however, just 17 percent of respondents reported that borrowing needs had increased, while 12 percent said that they had declined. Looking ahead, 24 percent of manufacturers indicated that they expected borrowing needs to be higher a year from now, whereas just 10 percent anticipated lower borrowing needs.

Queried about changes in credit availability, the vast majority of respondents reported no change--both over the past three months and over the past twelve months. However, the share of manufacturers reporting a tightening in credit was almost twice that reporting an easing in credit. This finding contrasts somewhat with survey results from March, when the percentage of respondents reporting easier credit matched the percentage reporting tighter credit. In last October’s survey, however, substantially more manufacturers noted a tightening than an easing of credit. Looking ahead to expected credit availability over the next year, three in four manufacturers anticipated no change. As in March’s survey, those expecting some change were fairly evenly split: 13 percent predicted some tightening in credit, while 12 percent anticipated some easing.

Firms reported some decline in borrowing costs, on net, over the past three months: 17 percent indicated declining costs, while just 7 percent noted increasing costs; the large majority (77 percent) reported no change. Net declines in borrowing costs were also seen in the March 2012 and October 2011 surveys. Nearly 90 percent of respondents reported no change in limits (ceilings) on existing lines of credit over the past three months

SOURCE: Federal Reserve Bank of New York

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