skip to Main Content

First Cut: New York Fed manufacturing survey points to improved conditions and outlook for May

The May general business conditions index in the New York Fed’s Empire State Manufacturing Survey was its most positive since November 2018. The index rose to 17.8 in May after 10.1 in April and was the firmest since 21.4 in November last year. Conditions haven’t fully retraced the softer readings of recent months, but this suggests activity as shaken off some of the short-term restraining factors like the partial federal government shutdown and severe weather events.

The index for conditions six months from now rebounded to 30.6 in May after 12.4 in April when concerns about higher tariffs and disrupted supply chains were more intense. Given the events of the past week, this more elevated confidence in the future could fall again in next month’s report.


The indexes are not calculated from the subindexes. These could bear a slightly less optimistic interpretation than perceptions of survey respondents.

New orders improved slightly (9.7 in May after 7.5 in April) and were the highest since December 2018, pointing to a little upward momentum but not as strong as even the slower pace at the end of last year. Shipments improved sharply (16.3 after 8.6) but still do not match the pace as recently as January which was part of a continued softening in production.

Delivery times slipped (0.7 after 7.0) but probably represents that goods were moving more comfortably after some weather disruptions. Inventories fell as well (-4.1 after 8.4) for similar reasons. Businesses will be glad that there is no sign of inventories piling up during a slower period for activity.

Although employment continued to expand (4.7 after 11.9) behavior of this subindex suggest that manufacturers are not seeking as many new workers. Instead, the steady expansion of the workweek (4.4 after 4.3) points to modest increases in hours worked rather than adding to payrolls.

Prices paid (26.2 in May after 27.3 in April) and prices received (12.4 after 14.0) point to relatively mild upward price pressures for inputs and pass-through of those costs.

The New York-ISM equivalent index — which only has a moderate correlation with the ISM Manufacturing Index — was 52.7 in May after 54.3 in April. It hints that decline in the ISM index to 52.8 in April after 55.3 in March may not see much improvement. However, I would take the equivalent index’s decline with a grain of salt. The increase in new orders and shipments likely outweigh the declines in delivery times, inventories, and employment.


Back To Top