Manufacturing Contracts Across Regions In May

Date: May 23, 2016 Last Edit: May 24, 2016

New York Reports Bigger Contraction Than Philadelphia Region

According to the latest reports from regional Federal Reserve banks, manufacturing activity across the US was mixed in May. The Federal Reserve Bank of New York’s Empire State manufacturing-activity survey indicated that the region’s manufacturing activity returned to contraction in May following two months of expansion. The AP reports that the index was pulled down by fewer orders and shipments at factories. The reading of minus-9 is a dramatic swing from April’s 9.6 figure, indicating that factories across New York “continue to struggle” despite the recent growth, the AP said. The survey’s component index for new orders also declined, to minus-5.5, from 11.1 last month, possibly signaling reduced output in June. Shipments, too, were down, sliding to minus-1.9 from 10.2.

MarketWatch says the Empire State survey’s employment subindex was one of the few metrics that increased in May, albeit modestly. The overall reading, however, “was far worse than the positive 5.8 forecast in a MarketWatch-compiled economist poll.”

In contrast to the large decline seen from April to May in the New York State index, the Federal Reserve Bank of Philadelphia manufacturing index was “virtually unchanged” from its April reading, Business Insider reported. The index registered -1.8 for May, slightly lower than the -1.6 reading in April. Economists had predicted the index to rise to 3 in May. Business Insider added that the “report suggests that the manufacturing recovery is still slow, and perhaps taking longer than expected.” MarketWatch reported that the Philadelphia index’s “gauge for future general activity slipped to 36.1 in May from 42.2” in April, which had been a 15-month high. While new-orders dropped from a “flat reading in April” to -1.9, shipments climbed 10 points from the previous month to -0.5.

What This Means For Small Businesses

Manufacturers across the US continue to feel the negative effects of economic uncertainty, according to results from these two key manufacturing surveys. These data align with the results of the NFIB’s latest Small Business Economic Trends report, which showed that in April, the net percent of small business owners planning to increase inventories was up 2 percentage points to 0%, hardly a robust result. Commenting on the results, NFIB Chief Economist Bill Dunkelberg cautioned that overall, “There is no exuberance to be found, a flatness in optimism pervades the economy, consistent with the plodding growth characterizing this recovery.”

Additional Reading

Business Insider also covers the New York State manufacturing index.

Note: this article is intended to keep small business owners up on the latest news. It does not necessarily represent the policy stances of NFIB.

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