New York Manufacturing Gauge Slumps, Hinting at Omicron Effect
The Federal Reserve Bank of New York’s general business conditions index plummeted to minus 0.7 from 31.9 a month earlier.
(Bloomberg) -- A gauge of New York state manufacturing slumped in January from a month earlier as measures of orders and shipments retreated sharply, suggesting the omicron variant of the coronavirus caused a pullback in activity.
The Federal Reserve Bank of New York’s general business conditions index plummeted to minus 0.7 from 31.9 a month earlier, a report showed Tuesday. Figures below zero indicate contraction, and the reading was weaker than all estimates in a Bloomberg survey of economists.
The median projection called for a reading of 25. Responses were collected between Jan. 3 and Jan. 10, when infection rates were picking up.
The 32.6-point plunge in overall business conditions was the largest since April 2020 in the immediate aftermath of the pandemic. An index of new orders dropped 32.1 points in January to minus 5, while the shipments gauge slumped 26.1 points to 1.
A measure of delivery times eased only slightly, while the average workweek and employment also showed a slower rate of expansion.
“Manufacturing in New York state is off to a weak start in 2022 as stronger Covid headwinds and supply chain struggles cause growth to stall,” economists at Oxford Economics said in a note. “Looking ahead, strong demand will keep factories in the region, as well as across the U.S., working hard this year. But supply-side difficulties will cap the gains and make it difficult for factories to fully meet demand.”
The report also suggests inflation is poised to remain persistently high well into this year. While the survey’s current price metrics eased, expectations about prices paid and received six months from now climbed to record highs.
Overall, manufacturers in the state remained upbeat about the outlook. The Fed’s measure of future business conditions remained solid at 35.1, reflecting a pickup in expected orders growth.
Furthermore, the Fed’s capital expenditures index rose to the highest since 2006 and technology spending improved slightly, indicating firms plan large increases in investment in coming months.
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