New York Manufacturing Gauge Slumps, Hinting at Omicron Effect

2/2 © Bloomberg. A worker sews U.S. military uniforms at the Alphapointe Association for the Blind manufacturing and training facility in the Queens borough of New York, U.S., on Wednesday, April 3, 2019. The Federal Reserve Bank of New York is scheduled to release Empire State Manufacturing figures on April 15. Photographer: Stephen Yang/Bloomberg 2/2

(Bloomberg) -- A gauge of New York state manufacturing slumped in January from a month earlier as measures of orders and shipments retreated sharply, suggesting the omicron variant of the coronavirus caused a pullback in activity.

The Federal Reserve Bank of New York’s general business conditions index plummeted to minus 0.7 from 31.9 a month earlier, a report showed Monday. Figures below zero indicate contraction, and the reading was weaker than all estimates in a Bloomberg survey of economists.

The median projection called for a reading of 25. Responses were collected between Jan. 3 and Jan. 10, when infection rates were picking up.

The 32.6-point plunge in overall business conditions was the largest since April 2020 in the immediate aftermath of the pandemic. An index of new orders dropped 32.1 points in January to minus 5, while the shipments gauge slumped 26.1 points to 1. The average workweek and employment also showed a slower rate of expansion.

At the same time, the report showed manufacturers in the state remained upbeat about the outlook. The Fed’s measure of business conditions six months from now only eased 1.3 points to 35.1, reflecting a pickup in expected orders growth.

Capital Investment

The Fed’s capital expenditures index rose to the highest since 2006 and technology spending improved slightly, indicating firms plan large increases in investment in coming months.

The price outlook also firmed, with indexes of future prices paid and received climbing the highest in data back to 2001.

Meantime, the Fed bank’s gauge of current prices paid for materials eased to a still-elevated 76.7, while an index of prices received slipped 7.5 points to 37.1. A measure of delivery times also cooled.

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