Manufacturing activity in the state of New York grew at its slowest pace in nearly two years, adding to the patchy run of national economic data that have emerged since the start of the year.
The headline index of general business conditions for manufacturers in the US’s third-biggest state by gross domestic product fell to 3.7 in March from 8.8 in the previous month, according to a survey conducted by the Federal Reserve Bank of New York.
That marks the index’s lowest level since May 2017 and was well short of the median reading of 10 expected by economists surveyed by Thomson Reuters.
March was the third consecutive monthly reading below 10, “suggesting that growth has remained quite a bit slower so far this year than it was for most of 2018”, the NY Fed said.
On the plus side, labour market indicators pointed to a rise in employment levels (the index for this rose 10 points to 13.8), but offsetting this was the average workweek index turning negative for the first time since 2016.
All told, firms remained “fairly optimistic” about the outlook for the next six months, the NY Fed said, although the March reading for this edged 3 points lower to 29.6. Indices for future new orders and shipments eased from February, but respondents expected “solid increases in employment and hours worked” in coming months.
Joshua Shapiro, chief US economist at MFR said the main reason the Empire index attracts market attention is because it is regarded as a precursor to moves in a similar survey compiled by the Federal Reserve bank of Philadelphia, the next release of which is out on March 31.
“In turn, the Philly index is viewed as a leading indicator of the ISM manufacturing index,” he said, referring to the Institute for Supply Management’s closely watched gauge. “Sometimes all this works, often it does not. Moreover, even when these indices move in the same direction in a given month, the relative magnitude of the changes often varies greatly. In any event, none of the regional indices can hold a candle to the national ISM data in terms of relevance to the economy as a whole.”