New York Fed president William Dudley
William Dudley, president of the Federal Reserve Bank of New York Reuters

Manufacturing in the New York region increased in March at its fastest pace since June 2010, according to a New York Fed survey released Thursday, but a mixed bag of indicators in the survey showcased the still-tepid state of U.S. factory activity.

The Empire State Manufacturing Survey's business conditions index, which covers New York, northern New Jersey and southern Connecticut, increased slightly, to 20.2 from 19.5, marking four consecutive months of growth.

The median forecast in a Bloomberg News survey of economists was 17.5 for the business conditions index.

A measure of factory orders fell nearly three points to 6.8 in March, down from 9.7 in February, while a gauge of shipments fell five points to 18.2 from 22.8. The unfilled orders index rose six points to -1.2; although negative, it was still the highest value for the index since June 2011.

The prices paid index shot up 25 points to 50.6, suggesting manufacturers saw a sharp increase in input costs; however, the prices received index fell two points to 13.6, suggesting a modest increase in selling prices.

Meanwhile, other indicators pointed to continued increases in the pace of hiring, as the number of employees index rose two points to 13.6 and the average workweek index climbed 11 points to 18.5.

The economy is gaining momentum and gaining breadth, John Herrmann, president of Herrmann Forecasting LLC in Summit, N.J., told Bloomberg before the report's release. Manufacturing is benefitting from consumers pulling back so much in the past few years. There's just this big replacement demand.

Manufacturers in the New York region, however, remained cautious, as indexes for the six-month outlook declined from February. The future general business conditions index fell nearly three points to 47.5 from 50.4, while the outlook for new orders and shipments all dipped but remained positive.