For the third consecutive month, the Empire State Manufacturing Index indicated that the manufacturing industry in New York is declining. Any value below zero indicates that manufacturing in New York is shrinking. The October survey recorded a -6.2. Many manufacturers reported a decline in the availability of credit, and indicated that business conditions in New York are deteriorating.
The decline in credit availability comes at a time when manufacturers are increasing their demand for financing. The report says “the share of manufacturers reporting a tightening in credit was almost twice that reporting an easing in credit. This finding contrasts somewhat with survey results from March, when the percentage of respondents reporting easier credit matched the percentage reporting tighter credit.”
The confounding part of the report comes at the very end of its supplemental survey. Even though firms desire financing and find a lack of supply, interest rates (the price of the financing) are declining.
Firms reported some decline in borrowing costs, on net, over the past three months: 17 percent indicated declining costs, while just 7 percent noted increasing costs; the large majority (77 percent) reported no change. Net declines in borrowing costs were also seen in the March 2012 and October 2011 surveys.
This type of abnormal economic behavior happens when regulation and monetary policy—not supply and demand—are driving the economy.