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By Shobhana Chandra
WASHINGTON - Manufacturing in the New York region contracted more than forecast in September as orders shrank, a sign the world’s largest economy will get less support from the industry.
The Federal Reserve Bank of New York’s general economic index dropped to minus 10.41, the lowest since April 2009, from minus 5.85 in August. The median forecast of 53 economists in a Bloomberg survey called for minus 2. Readings less than zero signal contraction in the so-called Empire State Index that covers New York, northern New Jersey and southern Connecticut.
Factories may slow assembly lines in the face of softening exports, restrained business investment and cooling household spending. Unemployment exceeding 8 percent for more than three years and a weaker economy this year help explain why Fed policy makers last week boosted record stimulus.
“The momentum has turned negative in manufacturing,” Guy Berger, a U.S. economist at RBS Securities Inc. in Stamford, Conn., said before the report. “There’s no imminent pickup in the near term.”
Bloomberg survey estimates ranged from minus 10 to 5.
Stock-index futures held losses after the figures, with the contract on the Standard & Poor’s 500 Index expiring in December declining 0.3 percent to 1,455.3 at 8:36 a.m. in New York.
The overall index is based on a separate question and does not reflect changes in areas like orders and employment. For that reason some economists consider it a measure of sentiment.
The Empire State gauge of new orders decreased to minus 14 this month, the lowest since November 2010, from minus 5.5 the prior month. A measure of shipments dropped to 2.8 from 4.1.
The employment measure fell to 4.3 this month, the weakest this year, from 16.5 in August.
The index of prices paid rose to 19.2 from 16.5 while prices received increased to 5.3 from 2.4.
At the same time, factory executives in the New York Fed’s district were more optimistic about the future. The gauge measuring the outlook six months from now climbed to 27.2 from 15.2.
Manufacturing makes up about 12 percent of the U.S. economy and about 6 percent of New York’s.
Companies concerned about the so-called fiscal cliff of fiscal policy changes include Caterpillar Inc., the largest maker of construction and mining equipment.
“The thing that’s really hanging over us right now is there is a large tax increase pending here at year-end, and there are large spending cuts, government spending cuts, looming at year-end,” Michael DeWalt, director of investor relations at Peoria, Ill.-based Caterpillar, said in a Sept. 14 conference presentation. “If something is not done about that, it could be quite negative. So, it’s not a clear picture.”
Economists monitor the New York report and Philadelphia Fed factory readings, due on Sept. 20, for clues about the Institute for Supply Management figures on U.S. manufacturing during the month.
Industrial production unexpectedly fell in August by the most since March 2009, a report from the Fed showed last week. The 1.2 percent decrease included declines in manufacturing, mining and utilities.
Consumer spending, which accounts for about 70 percent of the economy, is also cooling. Sales at retailers excluding auto dealers and gasoline service stations rose 0.1 percent in August following a 0.8 percent gain in July, Commerce Department figures showed last week. Overall purchases climbed 0.8 percent.
The Fed on Sept. 13 boosted record stimulus, announcing its third round of large-scale asset purchases since 2008 and extending the prospect of near-zero interest rates until mid- 2015.