NY Factory Growth Slows as Price Pressures Intensify

Manufacturing activity in New York expanded at a slower pace in September, while factory executives reported intensifying price pressures and worsening supply availability, according to the Federal Reserve Bank of New York.

The Empire State Manufacturing Survey’s general business conditions index fell 13 points to 7.6 in September, below economists’ 14.1 consensus forecast and down from 20.6 in August.

“On the heels of strong growth in August, New York State manufacturing activity continued to pick up modestly in September,” Richard Deitz, an economic research adviser at the New York Fed, said in the report. “Employment grew at a solid pace, while pricing pressures intensified.”

New orders edged higher, but the index fell sharply to 2.0 from 17.3 in August. The shipments index slipped into contractionary territory, falling to -3.2 from 11.7. Inventories increased, with that index rising to 8.9 from -5.2.

Supply conditions remained difficult. The supply availability index was -11.9, indicating that respondents continued to report worsening access to inputs, while the delivery-times index stood at 18.8, signaling significantly longer delivery times.

Employment remained a source of strength. The index for the number of employees rose to 10.6 from 9.3, and the average workweek measure jumped 10.1 points to 17.0—its highest reading in nearly five years.

Inflation indicators, however, moved in the wrong direction. The prices-paid index increased to 63.1 from 58.6, slightly exceeding its prior four-year high reached in May. The prices-received index climbed to 28.1 from 22.7, suggesting more manufacturers were raising selling prices.

Despite the moderation in current activity, manufacturers remained optimistic. The future-business-conditions index registered 29.0, with about half of respondents expecting activity to increase during the next six months. Still, the survey showed elevated expected price increases and only modest capital-spending plans.