New York Manufacturing Shows Modest Growth

New York Manufacturing Shows Modest Growth

High capacity utilization prompting higher capital spending.

Manufacturing activity expanded slightly in New York state but signs of a slowdown were abundant, according to the June Empire State Manufacturing survey conducted by the Federal Reserve Bank of New York.

The survey's index of general business conditions fell 15 points but continued in positive territory at 2.3. Some 31% of manufacturers reporting said activity expanded during the month, but 28% said conditions had worsened.

The new orders index declined six points to 2.2, and the shipments index plummeted 19 points to 4.8.

The prices paid index fell for a third consecutive month to 19.6, compared to 37.35 in May. The prices received index dropped 11 points to 1.0, indicating manufacturers' selling prices were essentially unchanged.

Employment indexes indicated a slight increase in hiring and a longer average workweek.

Capital Spending on the Rise

With growth in the economy, many manufacturers are having to invest in capital equipment. The bank found that 43% of respondents were planning to increase capital spending in the next six to 12 months. Only 16% reported they would be reducing spending.

Of those who reported they would be spending more, 44% said it was due to high capacity utilization, compared to 27% in August 2010 who said they would be increasing investment. The bank said other common reasons cited were expected sales growth and a need to replace equipment other than information technology. Also, nearly 32% said they needed to replace IT equipment and 29% said they had an improved cash flow/balance sheet position.

Six-Month Outlook Weakens

Looking ahead six months, manufacturers were becoming less optimistic about business conditions. The index for future general business conditions fell to 23.1, the fifth month of decline in a row.

The future new orders index fell 15 points to 15.5 and the future shipments index fell 13 points to 12.4.

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