Empire State Manufacturing Misses Expectations, Indicating Slower Growth

The expansion of manufacturing in New York unexpectedly slowed in the days around the 2020 election as orders and shipments decelerated.

The Federal Reserve Bank of New York said Monday that its general business conditions index decreased to 6.3 from a reading of 10.5 a month earlier. Economists had forecast a rise in the index to 13.5. The November slump brought the index below the bottom of the range of estimates of economists surveyed by Econoday.

Despite the decline, manufacturing continued to expand. Readings above zero indicate expansion. This was the second consecutive monthly decline in the index.

“Manufacturing activity in New York State expanded only to a small degree in November,” the New York Fed said in its report.

The Empire State report is the first of several regional Fed manufacturing indexes to be released this month. These are considered leading indicators for the economy because they reflect the current thinking of business leaders.

The share of respondents saying that business conditions are improving fell to 30.8 from 35.8 a month prior.  The bank’s measure of new orders dropped to 3.7 from 12.3.  The shipments index fell to a five-month low of 6.3 from 17.8.

The decline likely reflects the surge in Covid-19 cases in New York and around the country. New York announced last week a new order required bars and restaurants to close by 10 p.m. New York City schools may close if the test-positivity rate continues to climb. News of Pfizer’s vaccine broke on November 9, the last day of the New York Fed’s survey.

The election may also have weighed on the index. Expectations for new orders, shipments, and hiring fell but remained in positive territory, which could indicate businesses expect growth to be uneven in 2021. Presidential hopeful Joe Biden, who is currently favored by the mainstream media and online oddsmakers to win the presidency despite allegations of fraud and other illegality, has promised to raise taxes on businesses and impose climate change regulations that would weigh particularly hard on manufacturers. As well, Biden opposes the Trump administration tariffs that have ameliorated pressure on U.S. manufacturers from China’s predatory trade policies.

Overall, businesses remain optimistic, although less so than a month ago. The share saying they expect business conditions to improve fell to 48.7 from 52.7. At the same time, the share saying they expect business conditions to worsen also declined, falling 5.2 points to 14.7. As a result, the overall score for expectations of business conditions rose 1.1 point to 33.9.