Manufacturing activity in New York State expanded more than expected in March, reaching the highest levels since June 2010.

The index showing general business conditions in New York State increased to 17.5 points in January, up 2 points from February, the Empire State Manufacturing Survey from the Federal Reserve Bank of New York said on Tuesday.

Markets had expected the NY Empire State Manufacturing Index to rise to 16.5 points in March.

“The overall tone of March's US Empire State manufacturing survey is a lot weaker than the modest improvement in the headline index suggests. Nevertheless, even the headline index is still well below the readings in the mid-20s we were seeing at this time last year,” said Paul Ashworth, an economist with Capital Economics.

However, the index for new orders fell by 6 points to 5.81 points, while the shipments index decreased 10 points to 1.6 points in March.

“The bigger concern, however, is the slump in the new orders index and the drop in the shipments index,” said Ashworth.

Employment indexes were positive and above their February levels, indicating that employment had expanded. The index rose 5 points to 9.1 in the month.

“Admittedly, the employment index did strengthen, but that still leaves it at only half the level it was at a year ago,” said Ashworth.

Both prices paid and prices received indexes continued to climb, suggesting that price increases had accelerated. The prices paid index rose 7 points to 53.3 and the prices received index advanced 4 points to 20.8, its highest level since late 2008.

“The prices paid index jumped to a two-and-a-half-year high, most probably in response to the latest surge in the price of crude oil. The prices received index also hit a two-and-a-half-year high of 20.8, suggesting that at least some of the higher cost of raw materials is being passed on,” said Ashworth.

Further, the index showing future general business conditions held steady at 49.4 points, with 55 percent of respondents expecting conditions to be better over the next six months.

“This is a volatile survey and it has been consistently weaker than many of the other surveys for some time now, including the national ISM,” Ashworth added.