Manufacturing activity in the New York area slowed dramatically in early August, with growth coming in far short of analysts' forecasts and future indicators pointing to modest advances down the road, Federal Reserve Bank of New York said.
The bank's Empire State manufacturing index sank to 12.6, down 25 points from July's 35.6.
The August reading was the lowest since May, 2003.
Economists had been predicting a decline, but most had expected the losses to be much more contained. Analysts polled by Briefing.com had expected the August index to be closer to 32.3.
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“Similarly, indexes for new orders and shipments fell but remained positive, while the unfilled orders index dropped below zero for the first time in roughly a year,” the regional Fed said.
In terms of employment — a hot-button issue for economists after disappointing July non-farm payrolls numbers — the index remained positive, with about 26 per cent of survey respondents hiring more employees in August, while 9 per cent cut staffing levels.
Future indexes were also positive, although the outlook suggests “tempered optimism” on the part of manufacturers in the New York region, according to Monday's report.
“The future general business conditions index, at 47.6, indicated continued optimism, with more than half of respondents expecting conditions to be better in six months,” according to the report.
“The future new orders and shipments indexes were at similar levels. The future unfilled orders index dropped for a second consecutive month but remained slightly above zero.”
Royal Bank of Canada economist Ivan Rupcic said Monday's surprisingly weak report likely “points more to a slowdown than it does to a stall.”
The latest number also casts doubt about the expected strength in Thursday's Philadelphia Fed manufacturing survey. That index is now expected to fall to 30.8 from July's 36.1.
“We now see a large downside risk for the number,” Merrill Lynch senior economist Kathy Bosjancic said in a report. Merrill had been previously forecasting an increase in the closely watched Philly Fed index to 38.