The Empire State Manufacturing Survey general business-conditions index plummeted 26 points to -8.6 in June, representing its “largest monthly decline on record.”
It was also the first negative reading for the index since October 2016, according to the Federal Reserve Bank of New York.
The general business-conditions index had climbed 8 points to 17.8 in May, representing “its highest level in six months.”
The June reading, based on firms responding to the survey, indicates “business activity took a sharp turn downward in New York,” the New York Fed said in its Monday report.
A negative index number indicates a decline in the sector, while a positive reading shows expansion or growth in manufacturing activity.
The survey found 22 percent of respondents reported that conditions had improved over the month, while 30 percent said that conditions had worsened, the New York Fed said.
An article about the survey on website marketwatch.com included reaction from Josh Shapiro, chief U.S. economist at New York City–based MFR Inc. who thought the June index “was shockingly weak, raising a caution flag about the prospects for other manufacturing data in the month.” The article also had reaction from Ian Shepherdson, chief economist at United Kingdom–based Pantheon Macroeconomics, who believes the decline “was likely just a temporary response to the Mexico tariff fiasco.”
The U.S. and Mexico on June 7 reached an agreement to prevent tariffs on Mexico after the country agreed to take measures to stem the flow of migrants into the U.S.
New orders receded, while shipments increased “modestly,” the New York Fed said.
Unfilled orders fell, and delivery times and inventories moved slightly lower. Labor-market indicators pointed to small declines in employment and hours worked.
The pace of input price increases was little changed, while selling price increases slowed.
Indexes assessing the six-month outlook indicated that firms were “less optimistic” about future conditions than they were last month.
The New York Fed distributes the Empire State Manufacturing Survey on the first day of each month to the same pool of about 200 manufacturing executives in New York state. On average, about 100 executives return responses.
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VISUAL / PHOTO CREDIT: Federal Reserve Bank of New York website