By Xavier Fontdegloria


Manufacturing activity in New York contracted in January at the steepest pace since mid-2020 as increasing interest rates weighed on demand for goods, data from the Federal Reserve Bank of New York showed Tuesday.

The Empire State Manufacturing Survey's general business conditions index decreased to minus 32.9 in January from minus 11.2 in December, its lowest reading since the onset of the Covid-19 pandemic in spring 2020 and well below the minus 7 consensus forecast from economists polled by The Wall Street Journal.

The index, which is based on a survey of manufacturing firms in the New York area, suggests activity contracted sharply as the reading came in further below zero.

In January, 44% of firms said business conditions worsened while 11% said conditions improved, the New York Fed said.

The decline in activity was driven mainly by rapidly waning demand, according to the survey. The new orders index fell sharply to minus 31.1 in January from minus 3.6 in December, pointing to a steep decline in new orders. The shipments index faced a similar fate, declining to minus 22.4 from 5.3 a month earlier.

The index for number of employees also declined, to 2.8 from 14.0, the lowest reading in more than two years and suggesting that job creation stalled over the month.

The delivery times index was broadly unchanged at 0.9, suggesting vendor lead times were stable in January. Unfilled orders continued to decline, albeit at a softer pace than in December, the data showed.

Inflation pressures abated significantly at factory gates, according to the survey. The price paid index fell to 33.0 from 50.5, and the price received index decreased to 18.8 from 25.2.

Firms in the New York area expect little improvement in short-term business conditions. The index for future business conditions increased slightly to 8.0 from 6.3, with new orders and shipments expected to rise somewhat and employment increasing only modestly, the report said.


Write to Xavier Fontdegloria at xavier.fontdegloria@wsj.com


(END) Dow Jones Newswires

01-17-23 0844ET