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First Cut: General business conditions slightly improved for New York manufacturers in January

The general business conditions index in the New York Fed Empire State Manufacturing Survey rose to 4.8 in January after 3.3 in December and showed expansion at its firmest since 14.4 in May 2019. The level is consistent with no more than middling growth but it has managed to hold on to a positive reading for seven months in spite of the broader mild recession for the factory sector. However, the outlook for six months from now softened to 23.6 in January after 26.1 in December. Any future expansion is expected to be modest.

The report included annual revisions.

The index for new orders rose to 6.6 in January after 1.7 in December and was the best reading since 8.2 in May 2019. Unfilled orders continued to contract for an eighth straight month, but the -2.7 in January was closer to neutral than it has been for some months. Shipments were about on track with recent months at 8.6 in January after 9.5 in December.

The index for inventories was slightly negative in January at -0.7 after a positive of 2.2 in December. Factories are managing stocks carefully in the present environment. Delivery times remained shorter at -2.7 in January after -5.8 in December. Goods are moving through the supply chain without hindrance.

Factories continued to hire new workers where they could find ones with the right skills and/or experience. The employment index was at 9.0 in January after 10.4 in December and has remained positive for the past five months in spite of the generally slower conditions for manufacturing. The average workweek index also showed expansion for five months in a row at 1.3 in January from 0.7 in December.

The index for prices paid felt the increase in energy costs as well as some normal start-of-year price hikes. It rose to 31.5 from 15.2 in December and was the fastest increase in input costs since 34.1 in March 2019. The index for prices received also showed a bump higher at 14.4 in January from 4.3 in December and was also related to start-of-year pricing changes.

The New York-ISM equivalent index – calculated from the five components most like those in the ISM Manufacturing Index – rose slightly to 52.1 in January after 51.8 in December. The 0.3 point increase does not reflect any material change in momentum for the national index. The equivalent index has a similar correlation with the ISM index (0.728) as most of the other District Bank surveys.

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