New York area's factory activity slows in March
Empire State index plunges to 1.9, the lowest since May 2005
By Greg Robb, MarketWatch
Last Update: 10:28 AM ET Mar 15, 2007
WASHINGTON (MarketWatch) -- Manufacturing activity in the New York area slowed to its lowest level in almost two years in March, the New York Federal Reserve Bank said Thursday.
The bank's Empire State Manufacturing index fell sharply to 1.9 in March from 24.4 in February, putting the index at its lowest level since May 2005. Readings over zero indicate expansion.
The new orders index also fell sharply and the shipments and unfilled orders indexes declined.
The size of the decline surprised economists, who were expecting the index to slip to 19.0. See Economic Calendar.
Stocks opened lower on the weak factory data.
Economists were cautious about reading too much into the drop, saying they would wait for the second March factory index, from the Philadelphia region, before drawing many conclusions. The Philadelphia Fed's factory index will be released at noon.
Analysts at Action Economics said they weren't worried by the plunge in the headline index. They argued that the underlying data suggested that the closely-watched Institute for Supply Management factory index would remain above 50 in March. Readings over 50% indicate most firms are growing. The index has averaged 50.7% over the past four months.
"We view the [Empire State] headline drop more as reconciliation than new weakness for the ISM report," Action Economics wrote in a research note.
In a separate report, the Labor Department said core producer prices rose at a faster pace than expected in February. See full story.
The government also reported that jobless claims also fell in the latest week.
In the latest Empire State report, the prices-paid index inched upwards.
Expectations of price increases over the next six months also increased, suggesting that factory owners expect price pressures to accelerate.
March's Empire State new orders index fell to 3.1 from 18.9. Shipments fell to 18.5 from 27.1 in February.
The employment index fell slightly to 11.4 in March from 12.7 in February.
Survey respondents expected business conditions to continue to improve over the next six months.
The future index for general business conditions fell to 35.2 in March from 38.5 in the previous month
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