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The July Empire State Manufacturing Survey indicates that manufacturing activity expanded modestly over the month. The general business conditions index rose five points to 7.4. New orders, however, declined, as that index slipped into negative territory for the first time since November 2011, falling five points to -2.7. The shipments index increased five points to 10.3, indicating a rise in shipments. The prices paid index declined for a fourth consecutive month, dropping twelve points to 7.4, its lowest level since mid-2009. The prices received index inched up three points to 3.7. Employment levels climbed higher, with the employment index rising six points to 18.5, while the average workweek index fell three points to zero. Future indexes were generally positive, but many continued to drift downward and suggested that the level of optimism about future conditions remains below the level earlier this year.

In a series of supplementary questions, manufacturers were asked about their sales performance and expectations for 2012 compared with 2011. The median respondent reported that sales were up 4.5 percent for the first half of 2012 compared with the first six months of 2011, and are expected to be up 5 percent for the full calendar year—values slightly lower than what were reported in last July’s survey. In the current survey, the median respondent indicated a 2 percent increase in the number of employees—both for the first half of this year and for what is expected for the full-year 2012. On another question, moderately more respondents indicated that they had ramped up rather than scaled back production plans since the beginning of the year, reflecting a bit more optimism than last year’s responses suggested.

Business Activity Expands Modestly

The general business conditions index rose five points in July, from 2.3 to 7.4, suggesting that conditions improved modestly over the month. About a third of respondents reported better conditions, while a quarter saw them worsen. The new orders index fell below zero for the first time since November 2011, declining five points to -2.7 and indicating a slight decrease in orders. However, the shipments index rose five points to 10.3, indicating an increase in shipments. The unfilled orders index fell eight points to -13.6. The delivery time index was slightly lower at -1.2, while the inventories index rose out of negative territory to a level of zero, suggesting that inventory levels held steady over the month.

Increases in Input Prices Slow Further

The prices paid index fell for a fourth consecutive month, declining twelve points to 7.4, its lowest level since mid-2009. This index has fallen a cumulative forty-three points since March, pointing to a significant reduction in the pace of input price increases in recent months. The prices received index inched up three points to 3.7, and suggested a small increase in selling prices. The number of employees index climbed six points to 18.5, indicating a solid increase in employment levels, while the average workweek index fell to zero, indicating that hours worked held steady over the month.

Optimism Remains below Levels Seen Earlier in Year

Indexes for the six-month outlook generally remained favorable, but held at levels below those seen earlier this year. The future general business conditions index fell three points to 20.2, with 37 percent of respondents expecting improved conditions in the months ahead and 17 percent anticipating a worsening. The future new orders index declined two points to 13.6, while the future shipments index rose two points to 14.8. The future prices paid index held steady at 35.8, and the future prices received index was little changed at 16.1. The future number of employees index fell 10 points to 6.2, its lowest level in several months, while the future average workweek index fell to -4.9, its first negative value since late last year. The capital expenditures index inched down two points to 19.8, and the technology spending index rose six points to 18.5.