Manufacturing in New York Region Shrinks Again in December

Andrew Klips  |

For the fifth straight month, the Empire State Manufacturing Index held in negative territory in December.  The New York Federal Reserve Bank said on Monday morning that the index dropped to negative 8.1 in December, following a negative 5.2 reading in November.  Readings below zero signal declining activity in manufacturing in the New York region.  Economists predictions were wide-ranging, but generally expected an increase to at least negative 1 to Marketwatch predictions back into positive territory near 5.0

The New York index is the first in a series of regional reports from across the control, including Texas, Philadelphia and Kansas City.  Respondents in the survey were asked about the residual effects of Hurricane Sandy hitting the East Coast late in October.  Down-state businesses estimated that sales were 7 percent lower in October and 5 percent lower in November because of the superstorm.

New orders, a key metric for future growth, dropped to -3.7 from positive 3.08 in November (the first time they were in positive territory since June) as the shipment index slipped to 8.8 from 14.59.

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Expenses remained under pressure.  The prices paid index climbed to 16.13 in December from 14.61 in November while the prices received index dropped from 5.62 to 1.08.

Employment conditions also remained bleak, although increasing from -14.6 in November (the worst reading in more than three years) to -9.7 in December.

On the upside, expectations for general business conditions over the next six months improved from 12.88 to 18.66, indicating that companies expect business to pick back up in the mid-term.  The future new orders index jumped 11 points up to 32.3.  Businesses also seem to believe that employment will be better in the future too, as the forward-looking number of employees index moved from negative 1.12 to a positive 10.75 and the average work week climbed from 0.00 to 5.38.

Ultimately, the report was far weaker than expected and pointed to deteriorating conditions from November to December pretty much across the board.  But, the impact of Hurricane Sandy still played a role and the upcoming fiscal cliff could have weighed on business activity as well.  The optimism of respondents – at this point at least – is encouraging for those looking for a silver lining in the latest Fed report.

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