The New York Fed’s Empire State business conditions index, a gauge of manufacturing activity in the state, plunged 29.2 points in January to negative 43.7, the regional Fed bank said Tuesday. This is the lowest level since the depth of the pandemic in May 2020.
Economists had expected a negative 4 reading, according to a survey by the Wall Street Journal.
Any reading below zero indicates deteriorating conditions.
Over the past two months, the index has plummeted 58.2 points.
The index for new orders dropped 38.1 points to negative 49.4 in January. Shipments fell 24.9 points to negative 31.3 points.
Unfilled orders continued to shrink significantly and delivery times shortened. Employment and hours worked also contracted.
Optimism picked up but was subdued, as the index for future business conditions climbed 7 points to 18.8. Capital spending increased 10 points to 13.7.
The surprise decline adds doubts about the manufacturing sector, which has been struggling over the past year as interest rates have risen. The key national ISM factory index shows the sector has contracted for 14 straight months.
What the New York Fed said
“This outsized drop suggests January was a difficult month for New York manufacturers, with employment and hours worked also contracting,” said Richard Deitz, economic research advisor at the New York Fed.
Stocks (DJIA, SPX) were set to open lower on Tuesday, while the 10-year Treasury yield (BX:TMUBMUSD10Y) rose to 4% in early morning trading.