Conditions for New York manufacturers are deteriorating, according to the latest monthly Empire State Manufacturing Survey, released today by the Buffalo branch of the Federal Reserve Bank.

Of most concern, the May survey reports a sharp drop in the general business condition index, which is now at its lowest point since April 2003. Key finding:

Nearly one third of respondents, up markedly from 23 percent last month, reported that conditions had deteriorated, while 21 percent--down from 25 percent--said that conditions had improved.

On the bright side, the manufacturers' outlook for the future remains positive. Just over 50 percent expect business conditions to improve during the next six months, while only 15 percent expect conditions to worsen. Thirty five percent of manufacturers responding to the survey indicate they will be hiring additional workers in the next six months, compared to less than 13 percent who expect their employment to shrink.

Trends in this monthly survey are of interest beyond New York; indeed, although the survey is just three years old, it is now watched closely by financial markets. A recent study by the Fed's economists found that the Empire State Manufacturing Survey has been good at predicting U.S. trends in employment and production.

More background on the survey can be found here.