“Manufacturing Industry in New York Plunges Despite April Upturn: Empire State Survey”

By Le Figaro with AFP

Posted on 05/15/2023 at 4:00 p.m.

The manufacturing industry in the New York area recorded a very sharp decline in May, despite an upturn in April. Industry falters on sharp drop in new orders and employment as economy slows on rate hikes. The index measuring the evolution of manufacturing activity in this highly industrialized region plunged 43 points in May compared to April, falling to -31.8, according to the monthly Empire State survey, published Monday by the antenna of New York from the American central bank (Fed) and carried out with industrialists in the region.

Analysts expected a much less pronounced decline, and saw the index fall to -1.8 only, according to the consensus of Briefing.com. “Manufacturing activity has fallen significantly in New York State“, underlines the Fed. “New orders and shipments plunged after surging significantly last month. Delivery times have shortened somewhat and stocks have contracted“, specifies the central bank.

Conditions of employment are deteriorating

The rise in prices remained essentially identical to that of the previous month. However, companies in the sector have slowed down their investment plans and are still expecting “little improvement in conditions over the next six months“. As for the conditions of employment, they continue to deteriorate. Thus, the index measuring the number of employees remained negative, for the fourth month in a row, while that measuring hours worked fell below zero, which indicates a “slight decline» employment and number of hours worked.

To stem high inflation, la Fed has, since March 2022, raised its main key rate by 5 points, from 0 to 0.25%, to 5.00-5.25%. This leads banks to raise the cost of the loans they offer to households and businesses, to weigh on consumption and investment. Inflation, however, has not only slightly backward in April in the United States, at 4.9% over one year against 5.0% in March, according to the CPI index. However, it rebounded to 0.4% against 0.1% in March, over one month.

The risk is to see the economy slow down too much, or even fall into recession. Companies, anticipating this, are slowing down their investments and their orders, which weighs on industrial production.