Manufacturing activity in New York faced a surprising decline this month, indicating a return to contraction territory, as both orders and shipments fell sharply, according to data released by the Federal Reserve Bank of New York on Tuesday. The Empire State Manufacturing Survey revealed that the general business conditions index plummeted over 23 points to a concerning minus 11.9 in October.
Analysts had anticipated a more modest month-to-month decline, forecasting a drop to only 3.6 based on a Bloomberg survey. Richard Deitz, an Economic Research Adviser at the New York Fed, commented, “Manufacturing activity contracted modestly in New York State in October, with firms reporting that new orders declined.” Despite this contraction in manufacturing, there was a noteworthy expansion in employment for the first time in a year, although the increase was only marginal.
Notably, optimism regarding the economic outlook has grown significantly among manufacturers. The new orders index saw a dramatic tumble of about 20 points, landing at minus 10.2, while shipments decreased nearly 21 points to reach minus 2.7. On a more positive note, the employment gauge experienced a rebound, climbing nearly 10 points to 4.1, marking its first positive reading in the past year, according to the data provided by the Fed branch.
The report also highlighted a rise in raw material costs, with the associated index climbing to 29 in October, up from 23.2 the previous month. Additionally, the measure for selling prices increased to 10.8, compared to 7.4 in the prior survey. Looking ahead, manufacturers are feeling slightly more optimistic, as the six-month future outlook for general business conditions improved by 8.1 points, reaching a multi-year high of 38.7.
Meanwhile, the future new orders index decreased marginally by 1.5 points to 38.4, but the shipments gauge edged up by 1.2 points to 37.6. Furthermore, the outlook for employment growth rose to 19.5 from 17.3 month to month, indicating a cautiously positive perspective on future hiring..