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Federal Reserve Banks Report Slowing Manufacturing Growth, Optimism for 2021

Aug. 20, 2020
Survey results from Philadelphia and New York’s federal reserves show slackening recovery.

Manufacturing is still in a recovery space despite sustained effects of the coronavirus pandemic, based on the results of two regional manufacturing surveys. For August 2020, the Empire State manufacturing survey’s general business conditions index fell 14 points to 3.7, a drop that leaves the figure in expansion territory. Results from the Philadelphia Federal Reserve bank were similar as growth continued at a slower rate than in July. A supplemental survey produced by the Empire State Federal Reserve Bank that compared responses of manufacturing businesses and general business leaders suggests that manufacturing is recovering at a faster rate than other sectors.

The Philadelphia Federal Reserve’s Manufacturing Business Outlook Survey, published August 20, reported that several indicators fell but remained positive for the month. Indexes of general activity, new orders, shipments and employment dropped but sustained growth. The monthly general activity index fell seven points to 17.2, its third consecutive positive reading.

The Philadelphia new orders index fell four points to 19, and the employment index fell two points to 9. Despite the slackening growth pattern, manufacturers surveyed by the Philadelphia Federal Reserve, which covers a region including New Jersey and eastern Pennsylvania, anticipated growth over the course of the coming six months.

The Empire State manufacturing Survey, published August 18, yielded similar results. The general business conditions index for New York manufacturing fell 14 points to 3.7, again indicating slowed but sustained growth. The index for new orders dropped 16 points to -1.7, indicating slight contraction, but the employment index rose slightly to 2.4, indicating growth.

Slightly more respondents reported that conditions had improved (34%) than said they had worsened (30%). Like manufacturers who responded to the Philadelphia survey, respondents anticipated better conditions for the next six months.

The Empire State Federal Reserve also issued a survey on the sustained impact of the novel coronavirus to area manufacturers. The most significant issues for respondents were collecting payables from customers and maintaining an adequate cash flow: 59% of manufacturing respondents said they were at least “somewhat concerned” with collecting payables, and 16% said they were “very concerned.” Slightly more than one in four manufacturers listed maintaining a proper cash flow as very concerning, and 35% said they were somewhat concerned with it.

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