New York manufacturing sector growth slows, but optimism for the future

While manufacturing in the New York region was slower in December, respondents to the Empire State manufacturing survey were more optimistic about six months ahead.

The current general business conditions index fell to 4.9 in December from 6.3 in November, suggesting expansion at a slower pace, but the six months ahead general business condition index increased to 36.3 from 33.9.

Economists polled by IFR Markets expected the index would rise to 6.8 in the month.

“This is the weakest expansionary reading in four months,” said Scott Anderson, chief economist at Bank of the West. “Looking into the future, the six-month ahead general business conditions index improved to a three-month high as optimism around the vaccine shone through. However, the six-month ahead new order and number of employee components both slipped in December, suggesting the New York region manufacturing expansion could remain moribund for some time to come.”

The new orders index dipped to 3.4 from 3.7, while the shipments index grew to 12.1 from 6.3 and unfilled orders narrowed to negative 3.6 from negative 11.9, the Fed said.

The delivery time index climbed to 4.3 from 0.7, while the inventories index narrowed to negative 4.3 from negative 8.6 in the prior survey. The prices paid index grew to 37.1 from 29.1, while the prices received index slipped to 10.0 from 11.3. The number of employees index increased to 14.2 from 9.4 and the average employee workweek index held at 4.8, the Fed said.

In the forward looking indexes, the new orders index dipped to 32.3 from 32.9, while the shipments index rose to 32.7 from 28.2, and unfilled orders gained to 14.3 from 4.6 the Fed said. The delivery time index declined to 1.4 from 2.6, while the inventories index increased to 15.0 from 11.3.

Industrial production
Industrial production increased 0.4% in November, after a downwardly revised 0.9% gain in October, first reported as a 1.1% climb, according to the Federal Reserve.

Economists expected an increase of 0.3%.

Production remains about 5% lower than its February (pre-pandemic) level, according to the Fed, and 5.5% below year-ago levels.

Capacity utilization gained to 73.3% in the latest month from an upwardly revised 73.0% in October, first reported as 72.8%.

Economists predicted a 72.9% level.

“Mining production increased 2.3%, while manufacturing output rose 0.8% on a solid 5.3% increase in motor vehicles and parts production and utilities output contracted 4.3% as warmer-than-normal weather reduced the demand for heating,” Anderson said. “Capacity utilization is 6.5 percentage points below the long-run average from 1972-2019 but 9.1 percentage points above the April low as the manufacturing sector continues to recover from the pandemic recession.”

Import/export prices
Import prices climbed 0.1% in November, following a 0.1% decline in October, the Labor Department reported Tuesday.

Export prices increased 0.6% in November on the heels of a 0.2% gain the previous month.

Economists expected imports to edge 0.3% higher and anticipated an increase of 0.2% for exports.

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