New York City may still be closed for the most part, and the lights are still out on Broadway, but factories across the state are open for business. In the latest release of the Empire Manufacturing report for the New York region, the headline index of general business conditions rose from 3.7 up to 17.0 which was a full ten points above consensus forecasts. What’s very encouraging about these readings is that in the case of both current conditions and expectations, the levels for September are higher now than they were pre-COVID. Despite concerns that the running off of Federal relief programs was going to cause a sharp slowdown in activity, that hasn’t shown up in the Empire Manufacturing report as of yet.
In the early days of the COVID pandemic, manufacturers’ sentiment for present conditions dropped much more than their expectations for the future. In April, the spread between Expectations and Current Conditions was as wide as it has ever been. As businesses have come back online, though, things have moved back into a more normal range. In fact, the current spread of 30.60 is pretty much right in line with its historical average (30.1). That’s a great indication of how quickly certain parts of the economy have been able to adjust and adapt to the new reality.
Breadth in this month’s report was also fantastic. Every component of the Current Conditions part of the report improved relative to August, and just two of the components in the Expectations part (Delivery Times and Prices Received) declined. The biggest improvement came in the Average Workweek, while Number of Employees saw the smallest increase. That suggests that rather than hiring new workers, employers are getting more out of their current workforces. Not necessarily great for the jobs outlook.
Plans for Capital Expenditures and Technology Spending also increased in September. After dropping to their lowest levels since the Financial Crisis earlier this year, the rebound in both indices has been nearly as swift as the pullback. While current levels are still below where they were pre-COVID, the pace of recovery has never been sharper. The economy may still be far from normal, but things have bounced back a lot faster than many were thinking a few months ago. Click here to start a free trial to Bespoke to unlock full access to all of our research and interactive tools.