Empire State Falls Back to Neutral as Production Growth Slows — Evening Brief – 03.16.26

Manufacturing activity in New York state lost momentum in March, signaling a more uneven industrial recovery as factory shipments declined and overall business conditions slipped back toward neutral. 

The Empire State Manufacturing Index fell to -0.20 in March, down sharply from 7.1 in February and below the 3.9 consensus forecast, according to data released by the Federal Reserve Bank of New York. While the reading suggests activity has largely stabilized, the pullback highlights mixed conditions across the manufacturing sector. 

The report showed modest gains in new orders, while shipments declined, contributing to the softer headline reading. Meanwhile, unfilled orders increased, delivery times lengthened and supply availability deteriorated slightly, suggesting some ongoing friction within supply chains. 

Inventories rose modestly during the month, while labor conditions improved. Employment increased slightly and the average workweek edged higher, indicating that firms are cautiously maintaining staffing levels despite softer demand. 

Inflation pressures within the sector also eased somewhat. The prices paid index dropped to 36.6 from 49.1, signaling a slowdown in input cost increases, though costs remain elevated. The prices received index, which reflects selling prices, was little changed at 21.4, compared with 22.2 in the prior month. 

Despite the softer current conditions, “Firms remained optimistic about the outlook,” said Richard Deitz, economic research advisor at the New York Fed, noting that the future business conditions index climbed to 31.0, signaling expectations for stronger activity ahead. 

Separately, U.S. industrial production rose 0.2% month-over-month in February, slightly above the 0.1% consensus estimate, though slower than January’s 0.7% gain. Manufacturing output also increased 0.2%, while capacity utilization held steady at 76.3%, modestly above expectations.