Atlantic Manufacturing Activity Continues to Weaken

Business activity declined for a third consecutive month in October for New York manufacturers, the Federal Reserve Bank of New York’s Empire State Manufacturing Survey shows.

While the Philly Fed said its diffusion index for current activity climbed to a negative 4.5 in October from a negative 6.0 in September, a negative reading continues to indicate a contraction in manufacturing activity. The Shanghai composite index was 2.3% higher. At the same time, input prices (down from 0.5 to -0.1) were slightly negative, reflecting recent declines in energy prices and minimal inflationary pressures overall right now. A reading below zero represents contraction.

Prices remained steady, the Fed found, with 19 percent of firms reporting higher input prices, but 19 percent reporting lower ones. The Philadelphia survey follows a report earlier Thursday from the New York region, which showed dismal conditions across that state. Inventories (down from -2.7 to -17.4) contracted for the fourth time so far this year, with October’s pace of decline being the sharpest rate since April 2013.

The Philadelphia survey showed notable deterioration in most subindexes. This is the first time since 2009 that the index has been below negative 10 for three straight months. Indexes for new orders, shipments, employment, and average work hours all dipped into negative territory this month.

On the subject of jobs, “The survey’s indicators for labor market conditions suggest slightly weaker employment”. And employees worked fewer hours: The gauge measuring the average workweek tumbled to -7.3 from 7.0.

According to the report, “For the second consecutive month, regional manufacturers reported declines in overall activity”.

The diffusion index for future general activity fell to 36.7 in October from 44.0 in September, but 53% of firms expect increases over the next six months compared to the 16% that expect decreases. Still, the percentage of firms expecting increases over the next six months remains significantly greater than the percentage expecting decreases, the Philadelphia Fed said. For the USA, the capacity utilization rate for the manufacturing sector, overall, is estimated to be near the same as it was one year ago.