Factory activity in New York suffered an unexpected collapse in January, a survey from the Federal Reserve Bank of New York indicated Tuesday.
The NY Fed’s Empire State Manufacturing Survey showed business activity contracted sharply in January. The index of business conditions went into free fall, plunging 29.2 points in January to a reading of negative 43.7.
Economists had forecast an improvement in business conditions, predicting the index would rise to a negative 4.7 from the December reading of negative 14.5.
Readings below zero indicate worsening conditions.
The business conditions index has dropped 58.2 points over the past two months, the worst two-month decline in the history of the index.
The gauge of new orders dropped more than 38 points to minus 49.4, the worst reading since April 2020, when the economy was cratering from the pandemic lockdowns.
Even more troublingly, the index of prices paid by manufacturers climbed in January, suggesting mounting inflationary pressures. The index of what manufacturers charge dipped slightly.
Manufacturers indicated that they expect some improvement in the months ahead but the NY Fed said “optimism remained subdued.” The measure of future business conditions, which looks six months ahead, rose seven points to 18.8. The capital spending index climbed ten points to 13.7, which the NY Fed said indicates “some improvement” in investment plans.