Conditions for New York manufacturers have deteriorated at an accelerated rate in the month of September, according to a report released by the Federal Reserve Bank of New York on Monday, with the index of activity in the sector falling to its lowest level in over three years.
The New York Fed said its general business conditions index fell to a negative 10.41 in September from a negative 5.85 in August, with a negative reading indicating a contraction in regional manufacturing activity. Economists had been expecting the index to climb to a negative 2.0.
With the unexpected decrease, the general business conditions index fell to its lowest level since coming in at a negative 19.29 in April of 2009.
James Knightley, senior economist at ING, said the data will "heighten fears that the U.S. manufacturing sector is returning to recession," noting that the Institute for Supply Management's national manufacturing index has been in contraction territory for three months already.
A notable acceleration in the pace of contraction in new orders contributed to the weakness in the sector, with the new orders index falling to a negative 14.03 in September from a negative 5.50 in August.
The shipments index showed a more modest decrease, edging down to 2.75 in September from 4.09 in August. The index remained positive, indicating a modest increase in shipments.
The report also showed that the number of employees index tumbled to 4.26 in September from 16.47 in August, although it continued to point to job growth in the New York manufacturing sector.
On the inflation front, the prices paid index climbed to 19.15 in September from 16.47 in August, while the prices received index rose to 5.32 from 2.35.
The future general business activity also jumped to 27.22 in September from 15.20 in August, reflecting a recovery in the level of optimism about the six-month outlook.
"Maybe this relates to the recent encouraging news from Europe and hopes that once the US Presidential elections are out the way some uncertainty relating to the fiscal cliff will clear," Knightley said. "Nonetheless, it is not encouraging for the economy into year-end."
Thursday morning, the Philadelphia Federal Reserve is scheduled to release its own report on regional manufacturing activity in the month of September.
Economists expect the Philly Fed index to climb to a negative 4.0 in September from a negative 7.1 in August, although a negative reading would still indicate a contraction.
by RTT Staff Writer
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