After reporting an unexpected contraction in New York manufacturing activity in the previous month, the Federal Reserve Bank of New York released a report on Friday showing a substantial rebound in activity in the month of April.
The New York Fed said its general business conditions index soared to a positive 24.6 in April after tumbling to a negative 11.8 in March. A positive reading indicates an expansion in regional manufacturing activity.
Economists had expected the general business conditions index to show a much more modest rebound to a positive 0.5.
The rebound by the headline index came as the new orders spiked to a positive 25.1 in April from a negative 11.2 in March, and the shipments index skyrocketed to a positive 34.5 from a negative 7.4.
Meanwhile, the report showed the number of employees index slid to 7.3 in April from 14.5 in March, indicating a slowdown in the pace of job growth.
The New York Fed also said the unfilled orders index rose to 17.3 in April from 13.1 in March, while the delivery time index dropped to 21.8 from 32.7.
While the prices paid index jumped to a record high of 86.4 in April from 73.8 in March, the prices received index fell to 49.1 from 56.1.
Looking ahead, the New York Fed said firms were significantly less optimistic about the six-month outlook than in recent months.
The index for future business conditions tumbled to 15.2 in April from 36.6 in March, falling to its lowest level since early in the pandemic.
Longer delivery times, higher prices, and increases in employment are all expected in the months ahead, and capital spending plans remained firm, the New York Fed said.
“Empire manufacturing’s rise back into positive territory in April offers proof that a much-improved health situation hasn’t caused goods demand to fall off a cliff,” said Oren Klachkin, Lead U.S. Economist at Oxford Economics.
“We expect manufacturing in New York – and the US economy overall – to record a healthy streak of gains as factories work to fulfill unmet orders,” he added. “However, supply-side constraints aren’t going to dissipate any time soon and will continue to limit manufacturers’ ability to fully meet orders.”
Next Thursday, the Philadelphia Federal Reserve is scheduled to release its report on regional manufacturing activity. The Philly Fed Index is expected to drop to 20.9 in April from 27.4 in March.
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