Empire State factory index drops sharply in January

Factory sector activity in the New York area fell sharply at the start of 2023, the results of a closely followed survey revealed.

The Federal Reserve Bank of New York's factory sector index plummeted from a reading of -11.2 in December to -32.9 for January.

Economists had penciled in a reading of -8.7.

A sub-index linked to new orders dropped from -3.6 to -31.1, while that for shipments fell from 5.3 to -22.4.

Price pressures also retreated however with the sub-index that tracks the prices paid by companies declining from 50.5 to 33.0.

Subindices for staffing levels and the length of employees' workweeks both weakened.

The New York Fed's district included the State of New York, the 12 northern counties of New Jersey, Fairfield County in Connecticut, Puerto Rico, and the US Virgin Islands.

Despite January's plunge in the Empire State Index, Ian Shepherdson, chief economist at Pantheon Macroeconomics, was sanguine, pointing to trivial dip in a sub-index for firms' capital spending intentions.

The trend in that sub-index continued to point "tentatively" higher, he said.

"In any event, we are hopeful that the emerging upturn will accelerate later this year.

"Firms generally still have significant replacement capex to undertake after the decade of under-investment post-GFC, and plenty of spare cash built up during Covid to finance this spending."