Bloomberg News

New York Manufacturing Index Rises to Highest Since May

November 16, 2011

Nov. 15 (Bloomberg) -- Manufacturing in the New York region unexpectedly expanded in November, as measures of shipments and the employee workweek improved.

The Federal Reserve Bank of New York’s general economic index rose to 0.6, the first positive reading since May, from minus 8.5 in October. Economists projected the gauge would rise to minus 2, based on the median of 48 forecasts in a Bloomberg News survey. Readings higher than zero signal companies in the so-called Empire State Index, which covers New York, northern New Jersey, and southern Connecticut, are expanding.

American factories may keep leading the economy as demand from China and other emerging economies grows fast enough to drive orders and production. The industry is also benefiting as companies take advantage of tax depreciation allowances on equipment purchases before the end of the year.

“Manufacturing has found its footing from its soft-patch earlier this year and it continues to make progress despite the fact that sentiment is so downbeat,” John Herrmann, senior fixed-income strategist at State Street Global Markets LLC in Boston, said before the report. “Exports have tapped into the stronger growth in emerging markets and that has helped manufacturing.”

Bloomberg Survey

Estimates of economists surveyed ranged from 5 to minus 7.2. November’s advance broke a five-month-long contraction that was the longest since the last recession.

The headline index is based on a separate question and does not reflect changes in areas like orders and employment. For that reason, some economists consider it a measure of sentiment.

The Empire State gauge of shipments rose to 9.4 from 5.3. New factory orders decreased to minus 2.1 from 0.2 last month. A gauge of the average employee workweek rose to 2.4 from minus 4.5, while a measure of employment fell to minus 3.7 from 3.4.

Today’s report showed an index of prices paid fell to 18.3 from 22.5 while prices received rose to 6.1 from 4.5.

Factory executives in the New York Fed’s district became more optimistic about the future, the report showed. The gauge measuring the outlook six months from now climbed to 39, the highest since June, from 6.7.

General Electric Co. is among makers of heavy machinery that are profiting from growth in emerging markets even as it is wary of troubles in Europe. Fairfield, Connecticut-based GE on Oct. 21 posted an 11 percent gain in third quarter profits, and said revenue from industrial businesses was fed by growth in emerging markets such as China and India.

Emerging Markets

“Growth in emerging markets is booming,” Chairman and Chief Executive Officer Jeffrey Immelt said on an Oct. 21 conference call. “We are going to stay cautious on Europe.”

Economists monitor the New York and Philadelphia Fed reports for clues about the Institute for Supply Management figures on U.S. manufacturing during the month. The Philadelphia Fed is scheduled to release its gauge on Nov. 17. Economists forecast the index rose to 9 in November from 8.7 last month. The national ISM factory data will be released on Dec. 1.

The latest economic data have helped ease concerns the economy is sliding back into a recession after growth in the first half of the year almost stalled. The economy grew at a 2.5 percent rate in the third quarter, car sales last month rose the most in eight months and retail sales in September climbed by the most in seven months. Even so, job growth of 80,000 payrolls in October was the slowest in four months, a sign the labor market recovery is slow and uneven.

While exports in September were the highest on record, concerns of a European default and slower global growth may limit any further gains.

Helping support overseas demand for U.S. goods is the drop in the value of the dollar since the middle of last year. The Dollar Index, which IntercontinentalExchange Inc. uses to track the currency against that of six major trade partners including the euro and yen, fell 18 percent from June 7, 2010 to April 29. It has since trimmed that loss as the crisis in Europe deepened.

--Editor: Kevin Costelloe

Company news: GE US <Equity> CN

To contact the reporter on this story: Bob Willis in Washington at bwillis@bloomberg.net

To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net


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