The Federal Reserve Bank of New York has released its Empire State Manufacturing report for the month of June. While this is just one region, it is viewed as being close to a real-time report that can have an impact on broader regions’ manufacturing data.

According to the New York Fed, business activity nose-dived during June in the New York State Fed district. The headline general business conditions index fell a sharp 26 points down to -8.6 for June. The Wall Street Journal had published a consensus reading of 10.5.

While this number was in the red for the first time in two years and while this was a significant disappointment, that 26 point drop now has the dubious honor of being the worst drop seen. It is also before the real effects of tariffs should be felt.

Some 22% of respondents reported that conditions had improved over the month, but there were 30% of respondents who reported that conditions had worsened. New orders fell while shipments increased modestly; and unfilled orders fell while delivery times and inventories moved slightly lower.

As far as the employment situation in the New York region’s manufacturing sector, the New York Fed indicated that labor market indicators pointed to small declines in employment and hours worked during June.

The pace of input price increases was little changed, but selling price increases slowed. The prices received index fell by 6 points to 6.8 in June, the fourth consecutive decline and pointing to an ongoing deceleration in selling price increases.

The current environment is also taking a toll on business optimism. Indexes assessing the six-month outlook indicated that firms were less optimistic about future conditions than they were last month. The report said:

The index for future business conditions fell five points to 25.7. The indexes for future new orders and shipments fell to similar levels. Firms expected solid increases in employment but no change in the average workweek in the months ahead. The capital expenditures index fell sixteen points to 10.5, pointing to slower growth in capital spending plans, and the technology spending index fell ten points to 12.8.

Some investors will say this is just one region and just one report, and some may note that there are temporary issues or that the economy is no longer even a manufacturing economy. That said, the report was terrible when looked at as a whole. Each monthly survey is sent on the first day of each month to the same pool of about 200 manufacturing executives in the New York State area. These are typically the president or CEO, and the data is generally based on just about 100 responses by the 10th of each month with a cut-off of the 15th of each month.

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