New York manufacturing activity unexpectedly contracted in the month of March, according to a report released by the Federal Reserve Bank of New York on Monday.
The New York Fed said its general business conditions index plunged to a negative 21.5 in March from a positive 12.9 in February, with a negative reading indicating a contraction in regional manufacturing activity.
Economists had expected the general business conditions index to show a much more modest decrease and remain positive at 4.0.
The steeper than expected represented the largest point decrease on record and dragged the index down to its lowest level since 2009.
The sharp decline by the headline index came as the new orders index plummeted to a negative 9.3 in March from a positive 22.1 in February and the shipments index tumbled to a negative 1.7 from a positive 18.9 percent.
The number of employees index also slumped to a negative 1.5 in March from a positive 6.6 in February, indicating employment levels were little changed over the month.
The report also said the prices paid index edged down to 24.5 in March from 25.0 in February, while the prices received index slid to 10.1 from 16.7.
Looking ahead, the New York Fed said optimism about the six-month outlook fell sharply, with firms less optimistic than they have been since 2009.
The index for future business conditions plunged to 1.2 in March from 22.9 in February, suggesting firms no longer expect general business conditions to be better over the next six months.
A note from economists at Oxford Economists said the New York Fed’s report is likely to be the first of many indicators signaling economic activity has slowed sharply in the wake of the coronavirus outbreak.
“We are not surprised to see the index measuring manufacturing firms’ expectations also plunge to their lowest since the financial crisis – it’s hard to expect anything other than pessimism from manufacturers given the current backdrop,” the economists said.
“Coronavirus represents a multi-layered shock that will cause supply disruptions, choke off demand and tighten financial conditions,” they added. “We expect manufacturing to remain in a slump over the coming months.”
On Thursday, the Philadelphia Fed is scheduled to release its report on regional manufacturing activity in the month of March. The Philly Fed Index is currently expected to drop to 28.0 in March from 36.7 in February.
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