New York manufacturing activity has seen a significant contraction in the month of January, according to a report released by the Federal Reserve Bank of New York on Tuesday.
The New York Fed said its general business conditions plunged to a negative 32.9 in January from a negative 11.2 in December, with a negative reading indicating a contraction. Economists had expected the index to climb to a negative 4.5.
“Manufacturing conditions in the U.S. are deteriorating as central banks continue to raise rates and recessionary pressures constrain the sector’s advance,” said Gurleen Chadha, U.S. Economist at Oxford Economics.
“This coupled with tighter financial markets and a weaker labor market weigh on regional and national factory activity,” Chadha added. “The result has been a dwindling pipeline and downbeat sentiment.”
The unexpected slump by the headline index partly reflected significant decreases in new orders and shipments.
The new orders index dove to a negative 31.1 in January from a negative 3.6 in December, while the shipments index dove to a negative 22.4 from a positive 5.3 in the previous month.
The number of employees index also slid to 2.8 in January from 14.0 in December, although a positive reading still indicates modest job growth.
The report also said the prices paid index tumbled to 33.0 in January from 50.5 in December, while the prices received index fell to 18.8 from 25.2.
Looking ahead, the New York Fed said firms expect little improvement in business conditions over the next six months. The index for future business conditions inched up to 8.0 in January from 6.3 in December.
The Philadelphia Federal Reserve is scheduled to release its report on regional manufacturing activity in the month of January on Thursday. The Philly Fed Index is expected to rise to a negative 11.0 in January from a negative 13.8 in December.