New York Fed Releases September Manufacturing Survey as Factory Conditions Shift

Manufacturing activity in New York State continued to expand in September, but the pace slowed sharply from August, according to the latest Empire State Manufacturing Survey. The headline general business conditions index fell to 7.6 from 20.6 a month earlier, leaving the gauge in positive territory but well below the four-year high reached in August.

The details were mixed rather than uniformly weak. New orders increased slightly, shipments edged lower, unfilled orders rose modestly and delivery times lengthened notably. Inventories also increased. Taken together, the responses point to factories still seeing growth, but with less momentum in output and demand than during the stronger summer readings.

The New York Fed’s Empire State Manufacturing Survey is a monthly poll of manufacturing executives across New York State. The bank sends the survey to the same pool of roughly 200 executives and typically receives about 100 responses. Its headline general business conditions measure is a diffusion index based on whether firms report conditions improving, deteriorating or staying unchanged, so a positive reading indicates that improvement still outweighs deterioration on balance.

Growth remains positive after August’s surge

September’s 7.6 reading marks a clear deceleration from August, when the general business conditions index rose to 20.6, its highest level in more than four years. July had already produced a strong 15.6 reading after a weaker June, giving the region two months of accelerating factory activity before the September pullback.

The latest result therefore looks more like a loss of speed than a return to contraction. That distinction matters because the Empire State index can move sharply from month to month, and its direction is often more useful than any single reading in isolation. A positive index still means more respondents reported improving conditions than worsening ones, even when the level falls substantially from the prior month.

Orders and shipments reinforce that more nuanced picture. New orders increased slightly in September, which suggests demand did not reverse outright, while shipments dipped modestly. The rise in unfilled orders indicates that some work continued to accumulate in production pipelines. Longer delivery times and higher inventories add another layer, showing that firms were dealing with more than just a simple slowdown in incoming business.

Hours rise as price pressures strengthen

Labor indicators remained positive. The index for number of employees was little changed at 10.6, while the average workweek index jumped about 10 points to 17.0. Together, those readings suggest manufacturers continued adding workers on balance and increased the hours worked by existing staff even as the headline business conditions measure lost ground.

The workweek move is especially notable because it points to continued production needs inside firms despite the slower top-line survey reading. Employers can adjust hours faster than headcount, so a higher workweek index can signal that factories still have enough activity to require more labor input. At the same time, the relatively steady employment index suggests businesses were not responding to September’s softer conditions with broad staffing cutbacks.

Price measures moved in the opposite direction from the headline growth gauge. The indexes for prices paid and prices received each rose by about five points, indicating a faster pace of both input-cost increases and selling-price increases. August had already shown elevated cost pressure, with the prices paid index at 58.6 and the prices received index at 22.7. September’s further increase suggests that slower activity did not bring immediate relief on the pricing side.

That mix of softer growth and firmer price pressure is important for interpreting the survey. It does not amount to evidence of statewide manufacturing contraction, and the Empire State survey is not a national factory measure. It does show that New York manufacturers can face weaker momentum and rising costs at the same time, which can squeeze margins if firms cannot pass higher input costs through to customers.

The slowdown follows two stronger summer readings

The September report also needs to be read against the survey’s recent volatility. In July, the general business conditions index rose 10 points to 15.6 as new orders and shipments increased strongly. August then pushed the headline measure to 20.6, with the New York Fed describing activity as expanding strongly. The September move back to 7.6 gives up much of that acceleration without erasing the expansion signal.

The broader regional backdrop had already been mixed. In its September 2 update on the Second District, the New York Fed said economic activity continued to increase modestly and manufacturing growth had picked up to a moderate pace, while employment was steady overall. It also reported that input prices were still rising strongly even as selling-price increases eased slightly. The September manufacturing survey does not overturn that earlier assessment, but it shows that conditions changed quickly enough within the factory sector to warrant a fresh reading rather than simply extending August’s strong momentum.

For investors and businesses using the survey as an early regional indicator, the next question is whether September proves to be a temporary pause or the beginning of a broader cooling trend. The survey covers one state and a relatively small respondent pool, so confirmation from later regional surveys and national manufacturing data will matter before drawing a broader conclusion about U.S. factory activity.

The New York Fed is scheduled to release its next Empire State Manufacturing Survey on October 15. That report will show whether the September slowdown persists, while also providing another read on orders, employment, delivery times and the price pressures that strengthened in the latest survey.