New York manufacturing activity has seen only a slight expansion in the month of June, according to a report released by the Federal Reserve Bank of New York on Friday, with the index of activity in the sector falling by much more than economists had anticipated.
The New York Fed said its general business conditions index fell to 2.3 in June from 17.1 in May, although a positive reading still indicates growth in regional manufacturing activity. Economists had expected the index to show a much more modest decrease to a reading of 13.8.
With the much steeper than expected drop, the index fell to its lowest level since coming in at 0.8 in November of 2011.
Paul Dales, Senior U.S. Economist at Capital Economics, said, "The Empire State survey can be very volatile and note that it exaggerated the extent of the fall in the ISM index and the slowdown in GDP growth this time last year."
"Nonetheless, it's no surprise that the manufacturing sector, which is very exposed to overseas, appears to be struggling at a time when demand in China and the euro-zone is easing," he added.
The sharp drop by the headline index was partly due to a substantial slowdown in the pace of shipment growth, with the shipments index tumbling to 4.8 in June from 24.1 in May.
The new orders index also slid to 2.2 in June from 8.3 in May, indicating a notable slowdown in the pace of new orders growth.
Additionally, the report showed that inventories index fell to a negative 8.3 in June from a positive 4.8 in May, suggesting a contraction in inventories.
Reflecting a slowdown in the pace of job growth in the sector, the number of employees index also dropped to 12.4 in June from 20.5 in May.
On the inflation front, the prices paid index fell to 19.6 in June from 37.4 in May, while the prices received index slid to 1.0 from 12.1.
The New York Fed also noted that the indexes for future activity continued to fall in June, reflecting a further decline in optimism about the six-month outlook.
The future general business conditions index fell to 23.1 in June from 29.3 in May, marking the fifth consecutive monthly decrease by the index.
Next Thursday, the Philadelphia Federal Reserve is scheduled to release its report on regional manufacturing activity in the month of June.
The Philly Fed Index unexpectedly dropped to a negative 5.8 in May from a positive 8.5 in April, indicating a contraction in regional manufacturing activity.
by RTT Staff Writer
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