Business conditions for New York manufacturers were little changed in the month of October, according to a report released by the Federal Reserve Bank of New York on Tuesday.
The report showed that the general business conditions index fell to 1.5 in October from 6.3 in September. A positive reading indicates an increase in regional manufacturing activity, although economists had expected the index to climb to 7.0.
Paul Dales, Senior U.S. Economist at Capital Economics, said, "The fall in the U.S. Empire State manufacturing index in October … shows that the government shutdown and debt ceiling crisis are hitting sentiment. But the decline could have been much larger and it may not translate into a big fall in activity."
"The longer the government shutdown and debt ceiling debacle lasts, the bigger the hit to industry," he added. "But if the crisis is resolved in the next few days, as appears most likely, then the dent to the real economy will be small and short-lived."
While the headline general business conditions index showed an unexpected decrease, the component indexes turned in a more mixed performance.
The new orders index climbed to 7.8 in October from 2.4 in September, while the shipments index dropped to 13.1 from 16.4.
Meanwhile, the report said the number of employees index fell to 3.6 in October from 7.5 in September, indicating slower job growth.
The report also showed that the prices paid index edged up to 21.7 in October from 21.5 in September, while the prices received index slid to 2.4 from 8.6.
Looking ahead, the New York Fed said the indexes for the six-month outlook generally conveyed strong optimism about future business conditions.
The future general business conditions index inched up to 40.8 in October from 40.6 in September, reaching its highest level since April of 2012.
Peter Boockvar, chief market analyst at the Lindsey Group, said, "Bottom line, weakness in the headline number which is not a summary of its mixed parts doesn't leave us with much to conclude from."
"It is likely though that generally speaking for October, the diffusion indices such as this will be muted as the emotional uncertainty of what went on in D.C. will have an influence on the data," he added. "This said, the outlook didn't fall in spite of all the political wrangling."
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