Empire State Manufacturing Survey Paints a Gloomy June Picture — But Brightens the Outlook

The June Empire State Manufacturing Survey from the New York Fed revealed a deteriorating current business environment, with headline conditions sliding to -16.0—sharply below consensus expectations for -5.5 and weaker than May’s -9.2 print. The report, which surveys manufacturing firms in New York State, showed a broad-based contraction in activity, with notable weakness in new orders and shipments. Despite the gloomy headline, the survey offered a glimmer of optimism in its forward-looking indicators, suggesting firms see improvement on the horizon.

June marks the fourth straight month of contraction in the region’s manufacturing activity. The new orders index, a key gauge of demand, dropped sharply to -14.2 from +7.0 in May, the largest one-month drop since 2022. Shipments also weakened, with the index falling to -7.2 from +3.5, signaling that output is slowing as incoming demand cools. Unfilled orders turned negative as well, dropping to -8.3, and inventory levels held steady, offering little indication of stockpiling or forward planning.

While headline sentiment in the Empire report has historically skewed more pessimistic than other regional surveys—and often failed to translate into hard economic weakness—the timing of this release, just days before the Federal Reserve’s next policy decision, gives it additional weight. Investors and policymakers alike are parsing every indicator for signs of inflationary persistence or real economic softening.

A mixed picture emerges on pricing and employment. The prices paid index fell from 59.0 to 46.8, signaling a meaningful deceleration in input cost pressures, albeit at levels still indicative of inflation. On the other hand, the prices received index ticked up slightly to 26.6 from 22.9, suggesting firms are still able to pass some cost burden onto customers. This divergence may reflect margin compression or a shift in the composition of demand—where price increases are sticking in some categories even as upstream pressures ease.

Labor market indicators offered a modest upside surprise. The number of employees index rose into positive territory for the first time since January, climbing to 4.7 from -5.1, while the average workweek held relatively steady at -1.5. These figures hint at some stabilization in hiring and hours worked, even amid a broader slowdown in orders and output. While far from robust, the labor backdrop doesn’t yet suggest a rapid unwinding of employment in the region’s manufacturing sector.

Supply chain conditions showed marginal improvement. The supply availability index rose to -8.3 from -11.4, still in contraction but moving in the right direction. Delivery times were little changed, edging up to +1.8 from +1.0. These figures suggest lingering friction, but not a worsening crisis—particularly encouraging given global geopolitical tensions and renewed tariff anxieties.

Despite the deteriorating current conditions, firms’ six-month expectations improved markedly. The future general business conditions index jumped to +21.2 from -2.0 in May, marking its first return to positive territory since March. Forward-looking readings on new orders (+26.1), shipments (+23.0), and prices received (+41.3) all rose sharply, reflecting renewed optimism. Notably, supply availability expectations surged 22 points to -5.5, a sign that firms are growing more confident that input flows will normalize further in the second half of the year.

Still, capital spending plans remain muted. The forward-looking capex index dipped to -7.3, reinforcing the cautious tone from businesses despite a more optimistic headline outlook. A slow recovery in the real economy, fragile confidence in demand, and uncertainty surrounding trade policy are likely factors behind this investment hesitation.

Importantly, this report arrives as the Federal Reserve prepares for its June policy meeting, and it may modestly tilt expectations toward the dovish side. The combination of weakening orders, softer input inflation, and persistent employment resilience is the type of cross-signal environment that complicates rate-path projections. The Empire survey’s more downbeat tone is unlikely to shift the Fed’s stance on Wednesday, but it reinforces the case for caution in a still-uncertain economic landscape.

In summary, the Empire State Manufacturing Survey for June delivered a sobering snapshot of current activity in the region’s factory sector. With orders, shipments, and sentiment broadly deteriorating, the report reflects real pressure at the margin. Yet green shoots appear in the form of improving forward expectations, easing input costs, and nascent labor market stability. As the Fed meets this week, the report offers both a warning and a reason for hope—a fitting metaphor for the mixed signals coming out of the U.S. economy in mid-2025.