Empire State index remains deeply negative in November
Index rises but came in well below forecasts
A reading of New York-area manufacturing remained deep in negative territory in November, a further sign of the tough sledding facing U.S. factories in a weak global economy.
The Empire State general business conditions index inched up to a reading of negative 10.7 from negative 11.4 in October, the New York Fed said. This marked the first four consecutive months where the index has been below negative 10 since early 2009.
Economists had expected a smaller contraction in the index, which is on a scale where any positive number indicates improving conditions.
A MarketWatch-compiled economist poll had expected a negative 6.5 reading in November.
Both the new-orders component and the shipments index had smaller contractions in November. Readings for unfilled orders and inventories were weaker.
At the same time, labor market conditions continue to deteriorate, with employment levels and hours worked declining.
The index for future business activity was little changed, suggesting “tepid optimism” about the future, the New York Fed said.
Economists said the report was very weak but perhaps not a leading indicator of national trends.
“The only saving grace is that the NY Fed district is a small minority of the overall manufacturing sector, so there may be some issues specific to business conditions in the region or the specific subsectors in the region that are causing the weakness in the index. We do not think that this is a harbinger for the November ISM Manufacturing Index when it is released at the beginning of December,” said Thomas Simons, an economist at Jefferies.
The ISM index has stayed above 50, which indicates expansion, since November 2012. The index slowed to 50.1 in October.
The manufacturing sector faces tough conditions from slower oil company spending, the strong dollar and slowing growth in Asia, said Ian Shepherdson, chef economist at Pantheon Macroeconomics.
Paul Ashworth, chief U.S. economist at Capital Economics, said he didn’t expect “meaningful improvement” in the index anytime soon.
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