RTTNews - Conditions for New York manufacturers improved for the first time in well over a year in the month of August, according to a report released by the Federal Reserve Bank of New York on Monday, with the index of activity in the sector coming in well above expectations.
The New York Fed said its general business conditions index rose to 12.1 in August from a negative 0.6 in July, with a positive reading indicating an expansion in the manufacturing sector. Economists had been expecting the index to increase more modestly to 3.0.
With the bigger than expected increase, the index showed its first positive reading since coming in at 0.8 in April 2008, and it reached its highest level since coming in at 25.0 in November 2007.
Commenting on the data, Peter Boockvar, equity strategist for Miller Tabak, said, Net-net, the data is evidence that manufacturing will help lead the way to positive GDP in Q3.
Continued growth in new orders contributed to the improvement in the sector, with the new orders index rising to 13.4 in August from 5.9 in July. The shipments index also rose to 14.1 in August from 11.0 in the previous month.
While the number of employees index rose for the sixth consecutive month, it remained below zero at negative 7.5 in August compared to a negative 20.8 in July. Nonetheless, the index was at its highest level October 2008.
The report also showed that the inventories index rose to a negative 22.3 in August from a negative 36.5 in July, although it still indicated the twelfth consecutive month of contraction.
On the inflation front, the report showed a mixed picture. While the prices paid index rose to 13.8 in August from 10.4 in July, the prices received index fell to a negative 12.8 in August from a negative 8.3 in the previous month.
Looking ahead, the New York Fed noted that the future indexes rose significantly in August, reflecting expectations that conditions will continue to improve in the months ahead.
The future general business conditions index rose to 48.2 in August from 34.0 in July, rising to its highest level since July 2007. The report also showed increases by the future new orders index, the future shipments index and the future employment indexes.
On Thursday, the Philadelphia Federal Reserve is due to release its regional manufacturing report, with the index of activity in the sector expected to rise to a negative 2.0 in August from a negative 7.5 in July.
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