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Manufacturing in New York Region Contracts for Third Month

Monday, 15 Oct 2012 09:01 AM

Manufacturing in the New York region contracted for a third straight month in October as shipments and employment declined, indicating the economy will get less support from factories.

The Federal Reserve Bank of New York’s general economic index rose to minus 6.2 from minus 10.4 in September, which was the lowest since April 2009. The median forecast of 46 economists in a Bloomberg survey called for minus 4. Readings of less than zero signal contraction in New York, northern New Jersey and southern Connecticut.

Manufacturing, a mainstay of the three-year economic expansion, has been cooling as export orders slow and consumers restrain spending. Companies are also curbing investment on concern that Congress will fail to avert automatic federal tax increases and spending cuts scheduled to go into effect early next year, slowing the economy.

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“U.S. manufacturing is still struggling,” said Kenneth Kim, an economist with Stone & McCarthy Research Associates in Princeton, New Jersey, before Monday’s report. “The economy is still expanding at a pretty slow, sub-par pace.”

Bloomberg survey estimates ranged from 5.0 to minus 12.

The Empire State gauge of new orders increased to minus 9 this month from minus 14 in September, which was the lowest since November 2010. A measure of shipments dropped to minus 6.4 from 2.8.

The employment measure fell to minus 1.1, the worst this year, from 4.3 in September.

Prices Paid

The index of prices paid declined to 17.2 from 19.2, while prices received fell to 4.3 from 5.3.

Factory executives in the New York Fed’s district were less optimistic about the future. The gauge measuring the outlook six months from now fell to 19.4 from 27.2.

Manufacturing makes up about 12 percent of the U.S. economy and about 6 percent of New York’s.

Slowing global growth is cutting into overseas demand for U.S.-made goods. The International Monetary Fund this month cut its global growth forecasts as the euro area’s debt crisis intensifies and warned of even slower expansion unless officials in the U.S. and Europe address threats to their economies.

The world economy will grow 3.3 percent this year, the slowest since the 2009 recession, and 3.6 percent next year, the IMF said, compared with July predictions of 3.5 percent in 2012 and 3.9 percent in 2013.

The U.S. trade deficit widened in August as exports dropped, Commerce Department figures showed last week. The gap grew 4.1 percent to $44.2 billion from $42.5 billion in July, Exports decreased to the lowest level since February.

Cutting Estimates

More companies are cutting estimates after U.S. gross domestic product expanded at a 1.3 percent annual rate in the second quarter, down from 4.1 percent in the final three months of last year.

Advanced Micro Devices Inc., the second-largest maker of PC processors, based in Sunnyvale, California, cut its third-quarter revenue forecast last week, citing weak demand across all product lines.

Caterpillar Inc. in Peoria, Illinois, cut its forecast for 2015 earnings on Sept. 24 after commodity producers reduced capital expenditures. The world’s biggest construction and mining equipment maker is due to announce results on Oct. 22.

“We see fairly anemic and modest growth through 2015,” Caterpillar Chairman and Chief Executive Officer Doug Oberhelman said in a presentation to analysts that day at the MINExpo industry conference in Las Vegas.

At Richardson Electronics Ltd., a Lafox, Illinois, maker of semiconductors and other components, customers are being cautious with orders and making do with parts they already have, Chief Executive Officer Edward Richardson said.

“The whole economy is what I would call nervous,” Richardson said on an Oct. 11 earnings call. Customers anticipate a pickup at the beginning of next year, he said.

Economists monitor the New York report and Philadelphia Fed factory readings, due on Oct. 18, for clues about the Institute for Supply Management figures on U.S. manufacturing during the month.

The Fed in September announced a third round of large-scale asset purchases and extended the prospect of near-zero interest rates until mid-2015 in a bid to boost growth.

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Manufacturing in the New York region contracted for a third straight month in October as shipments and employment declined, indicating the economy will get less support from factories.
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2012-01-15
Monday, 15 Oct 2012 09:01 AM
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