Manufacturing in the New York region unexpectedly contracted for a third straight month in August as orders and inventories dropped, a sign the industry that has led the economic recovery is at risk of stumbling.
The Federal Reserve Bank of New York’s general economic index fell to minus 7.7 from minus 3.8 in July, a report showed today. The median forecast in a Bloomberg survey called for an index of zero, the dividing line between expansion and contraction. The so-called Empire State Index covers New York, northern New Jersey and southern Connecticut.
Weaker demand from consumers and businesses, coupled with slowing growth in emerging economies and Europe, means factories are ratcheting down production. The Fed, in its policy meeting last week, said growth this year had been "considerably slower" than forecast and announced it would keep its benchmark lending rate near zero at least though mid-2013 to spur growth.
The measure of New York-area manufacturing last contracted for three straight months in the period ended in June 2009, during the last recession. Estimates in the Bloomberg survey of 55 economists ranged from minus 10 to 8.5.
The headline index is based on a separate question and does not reflect changes in areas like orders and employment. For that reason some economists consider it a measure of sentiment.
The Empire State gauge of new orders fell to minus 7.8 from minus 5.5 last month. A gauge of unfilled orders dropped to minus 15.2 from minus 12.2. A measure of shipments advanced to 3 from 2.2.
The employment measure rose to 3.3 from 1.1. An index of prices paid dropped to 28.3 from 43.3 while prices received decreased to 2.2 from 5.6.
Factory executives in the New York Fed’s district were also less optimistic about the future. The gauge measuring the outlook six months from now plunged to 8.7, the lowest reading since February 2009, during the depths of the recession, from 32.2. It was the third-lowest reading since records began in 2001.
