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Empire State Manufacturing Survey Conditions Deteriorated
The Empire State Manufacturing Survey indicates that conditions deteriorated in November for New York State manufacturers. For the first time since mid-2009, the general business conditions index fell below zero, declining 27 points to -11.1. The new orders index plummeted 37 points to -24.4, and the shipments index also fell below zero. The indexes for both prices paid and prices received declined, with the latter falling into negative territory. The index for number of employees remained above zero but was well below its October level, and the average workweek index dropped to -13.0. Future indexes generally climbed, suggesting that conditions were expected to improve in the months ahead, although the capital spending and technology spending indexes inched lower.
In a series of supplementary questions, respondents were asked about cash holdings and debt financing. A majority of respondents reported that they expected their outstanding debt levels to remain unchanged over the next year; of those firms that expected a change in debt levels, the number anticipating a decline somewhat exceeded the number expecting an increase. In response to a question about current cash holdings, 35 percent of firms said that they were currently holding higher than usual (excess) cash balances, while just 22 percent indicated that their cash balances were lower than usual. Moreover, looking ahead to the next twelve months, a sizable 42 percent of respondents expected their cash holdings to increase, whereas fewer than half that number expected cash balances to decline. Finally, when asked how they planned to finance capital spending over the next year, respondents indicated that they would use cash to finance nearly 60 percent of expenditures.
Business Activity Declines
The general business conditions index fell below zero for the first time since July of 2009, dropping a steep 27 points to -11.1—an indication that, on balance, conditions had worsened over the month. The percentage of respondents reporting that conditions had improved fell from 35 percent in October to just 17 percent in November, while the percentage reporting that conditions had worsened rose from 20 percent to 28 percent. The new orders index plummeted 37 points to -24.4, its sharpest drop since September 2001. Nearly 40 percent of respondents reported that orders were down. The shipments index fell 26 points to -6.1, and the unfilled orders index declined 23 points to -24.7. The delivery time index, at -9.1, was little changed. The inventories index rose to zero after dropping into negative territory last month.
Posted: November 15, 2010 Monday 08:30 AM