NY Empire Manufacturing Index Plummets

Manufacturers in the New York region said business worsened in early December, according to a report released Monday that shows the difficult time for factories after Hurricane Sandy.

The Empire State index fell to negative 8.1, a drop from the negative 5.2 seen in November, indicating the downturn broadened to touch more firms in the New York Fed’s latest survey.

It marked the fifth month in a row that the index has been in negative territory. Readings below zero indicate activity is declining.

In December, 23% of firms said business got worse, while 15% said business improved.

The drop in the index came as a surprise. Economists surveyed by MarketWatch expected the headline index to rise to 5.2 as activity recovered in the aftermath of regional disruptions caused by Hurricane Sandy.

Despite the weak data, stocks opened higher, with the Dow Jones Industrial Average DJIA +0.42% up 42 points to 13,177. Analysts said the gain was due to growing optimism that Congress and the White House will reach a budget deal to avert the fiscal cliff. Read Market Snapshot.

According to the report, manufacturers in the parts of the region hit by Sandy estimated that revenues in October were 7% lower than otherwise would have been and 5% lower in November. Read the full survey.

The Empire State data are watched closely because they are the first regional reading of the health of the nation’s manufacturing sector. Similar factories data for the Philadelphia region are due later this week.

Both reports are diffusion indexes where readings above zero indicate more respondents saw improvement during the month.

The report “shows that the economy is still struggling under the weight of excess inventory and limited demand,” said Steve Ricchiuto, chief economist at Mizuho Securities.


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Dean Popplewell

Dean Popplewell

Vice-President of Market Analysis at MarketPulse
Dean Popplewell has nearly two decades of experience trading currencies and fixed income instruments. He has a deep understanding of market fundamentals and the impact of global events on capital markets. He is respected among professional traders for his skilled analysis and career history as global head of trading for firms such as Scotia Capital and BMO Nesbitt Burns. Since joining OANDA in 2006, Dean has played an instrumental role in driving awareness of the forex market as an emerging asset class for retail investors, as well as providing expert counsel to a number of internal teams on how to best serve clients and industry stakeholders.
Dean Popplewell