New York Manufacturing Index Plunges Much More Than Expected In May

(RTTNews) - New York manufacturing activity has seen a substantial downturn in the month of May, 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 plummeted to a negative 31.8 in May from a positive 10.8 in April, with a negative reading indicating a contraction. Economists had expected the index to drop to a negative 2.5.

The much bigger than expected pullback by the headline index came as new orders and shipments plunged after rising significantly last month.

The new orders index dove to a negative 28.0 in May from a positive 25.1 in April, while the shipments index tumbled to a negative 16.4 from a positive 23.9.

Meanwhile, the number of employees index rose to a negative in 3.3 in May from a negative 8.0 in April, although the negative reading still indicates a decrease in employment for the fourth straight month.

The report also said the prices paid index inched up to 34.9 in May from 33.0 in April, while the prices received index edged down to 23.6 from 23.7.

Looking ahead, the index for future business conditions rose to 9.8 in May from 6.6 in April, suggesting firms do not expect activity to improve much over the next six months.

The New York Fed noted the capital spending index slumped to 0.9 n May from 16.5 in April, falling to its lowest level in three years.

"Manufacturing conditions in the US are deteriorating and the worst is likely ahead. It is being hurt by tighter monetary policy, tough credit conditions, and a weakening in the domestic and global economy," said Gurleen Chadha, U.S. Economist at Oxford Economics.

On Thursday, the Philadelphia Federal Reserve is scheduled to release its report on regional manufacturing activity in the month of May.

The Philly Fed's diffusion index for current activity is expected to climb to a negative 19.0 in May from a negative 31.3 in April, although a negative reading would still indicate a contraction.