Business conditions in New York’s factory sector weakened more than expected, a report from the Federal Reserve Bank of New York indicated Friday.
The N.Y. Fed’s “Empire State” manufacturing index sank to -14.5 in December, the lowest level in four months. Economists had forecast a reading of 3.7 after November’s 9.1.
The 24-point decline points to further weakness in the manufacturing sector. Despite stronger than expected holiday sales, U.S. consumers have pulled back on purchases of goods and businesses have been reducing their inventories.
The index for new orders dropped six points to -11.3, the third straight monthly decline. Shipments and payrolls also declined. The workweek came in shorter.
The barometers of inflationary pressures were mixed. The index for costs of goods fell 5.5 percent. The index for prices paid by customers rose 0.4 percent.
After a sharp plunge last month, the index for future business conditions improved but remains low enough to suggest manufacturers are not expecting much improvement in the months ahead. Nw orders, shipments, and employment are expected to grow only modestly over the next six months. Capital spending plans remain depressed.
Expectations for prices paid by manufacturers and prices received both declined, indicating an expectation of lower inflation in the first half of next year.
The Federal Reserve’s interest rate hikes have not raised unemployment or lowered consumer spending but they have weighed on the more interest rate parts of the economy such as home sales and the manufacturing sector.