Disturbing trends seen in manufacturing data

ALBANY — The Federal Reserve of New York’s latest Empire State Manufacturing Survey shows a continued drop in manufacturing activity in the state, a worrisome trend amid the market turmoil hitting the tech and banking sectors.

The survey’s general business conditions index fell 19 points in March to -24.6 points, continuing a “see-saw pattern of ups and downs” within negative territory, the New York Fed said in its monthly report issued Wednesday.

“New orders dropped significantly, and shipments declined modestly,” the report says. “Both employment and hours worked declined for a second consecutive month ... Looking ahead, businesses expect little improvement in conditions over the next six months.”

Data for the survey is collected the first week of each month from about 200 manufacturing executives around the state. The data was released as fears over the global banking sector caused a broad stock market sell-off that sent the Dow Jones Industrial Average down 645 points, or 2 percent, just after noon Wednesday.

The last time that there was such a steep and prolonged drop in the general business conditions index, the Empire State Manufacturing Survey’s key indicator, was during the 2008 recession. However, the New York Fed report does not mention any fears of recession. The report’s authors could not immediately be reached for comment. The index also plummeted in early 2020 when governments forced most businesses to shut down due to the pandemic.

But once factories and businesses were allowed to reopen, the index quickly soared back into positive territory amid a swell of government aid to businesses and federal spending on infrastructure and technology.

During March, the new orders index, which tracks the strength of order flow at New York factories, dropped 14 points to reach -21.7, meaning that orders have declined substantially.

And the shipments index also dropped 14 points to reach -13.4 points.

It is unclear what the exact impact is on large manufacturers in the Capital Region such as Globalfoundries in Malta and General Electric Co. in Schenectady. However, both companies have gone through layoffs in the last six months, and Globalfoundries in particular has been warning that orders were expected to drop during the first half of 2023 as part of a larger contraction in the tech industry.

The Federal Reserve’s ongoing struggle with inflation, which has included repeated increases in interest rates, appears to have only gotten more difficult after the failure of two regional banks in the past week. Now there are questions about whether the Fed should continue to raise rates amid apparent cracks in the banking system, which also includes fears that the European bank Credit Suisse might also fail.

Another troubling indicator in the New York Fed manufacturing survey is the business outlook over the next six months. That number fell 12 points in March, down to 2.9, which implies that CEOS do not expect business activity to improve much over the next six months.

A zero is the middle of pessimism and optimism — so at 2.9 points, the CEOS are barely optimistic.

Courtesy of the Port of Albany A rendering the wind turbine tower factory that is being planned by the Port of Albany for a site in Glenmont on the Hudson River. The facility will employ 500 people when completed by 2024 if everything goes as planned. A recent Federal Reserve of New York survey found manufacturing employment and orders have been dropping sharply in recent months.

Will Waldron / Times Union archive This month’s Empire State Manufacturing Survey found a steep drop in orders and shipments for New York manufacturers. Globalfoundries, above, laid off more than 200 workers in December in Malta in anticipation of a reduction in orders during the first half of 2023.