Business activity in state expands, Fed survey finds
Growth is first seen since shutdown caused by COVID-19 pandemic
For the first time since the pandemic nearly shut down the economy, business activity is growing again, a new survey of business leaders by the Federal Reserve Bank of New York found.
In a report released Friday, the Fed said its business activity index for a region that includes New York state and northern New Jersey had increased 35 points to 30.2. The diffusion index the Fed uses is calculated by subtracting the percentage of respondents reporting decreases from the percentage reporting increases.
A negative number suggests that conditions are worse than normal, while a positive number suggests they are improving.
The business climate index in Friday’s survey remained negative, despite a 25-point improvement to -25.6, “indicating that firms continued to view the business climate as worse than normal, but much less extensively than in previous months.”
The survey also found that employment conditions are improving, with employment levels increasing for the first time in more than a year. Wages were also increasing, but not as strongly as in March.
And prices paid continued to increase, as did prices received.
Recessions and recoveries are usually driven by manufacturing, wrote Fed officials Jason Bram and Richard Deitz in a blog item included with the survey. So the increases noted in the service sector survey were significant.
“Finally this month, the Federal Reserve Bank of New York’s April business surveys point to a solid increase in service sector activity as well as continued strength in manufacturing activity in the New York-northern New Jersey region, marking the first signs of widespread growth since the pandemic began,”
Bram and Deitz wrote in the Fed’s Liberty Street Economics blog.
And while a “vast majority” of respondents expected revenues would increase as normal business conditions return, they also identified headwinds that could
slow that recovery.
“The constraints most widely cited by service firms were the ability to procure adequate staff, as well as residual COVID -related restrictions and regulations more generally,” they wrote. “Among manufacturers, the most widely cited constraints were availability and prices of inputs.”