A report released by the Federal Reserve Bank of New York on Tuesday showed regional manufacturing activity edged slightly higher in the month of December.
The New York Fed said its general business conditions index slipped to 4.9 in December from 6.3 in November, but a positive reading still indicates growth in regional manufacturing activity. Economist had expected the index to dip to 5.8.
“Empire State manufacturing growth pulled back to a softer pace of expansion in December as the recovery cools and resurgent infection rates weigh on activity,” said Oren Klachkin, Lead U.S. Economist at Oxford Economics.
The modest decrease by the headline index partly reflected a slight slowdown in the pace of growth in new orders, as the new orders index edged down to 3.4 in December from 3.7 in November.
On the other hand, the report said the shipments index jumped to 12.1 in December from 6.3 in November and the number of employees index advanced to 14.2 from 9.4.
The prices paid index also surged up to 37.1 in December from 29.1 in November, while the prices received index fell to 10.0 from 11.3.
Looking ahead, the New York Fed said firms remained optimistic that conditions would improve over the next six months, with the index for future business conditions rising to 36.3 in December from 33.9 in November.
“Manufacturing’s strong performance this year isn’t likely to be repeated in 2021,” Klachkin said. “An end to the health crisis is slowly coming into view, but less buoyant demand, some lingering Covid-related supply chain disruptions, and less stimulative fiscal policy will constrain manufacturing activity next year.”
He added, “Additionally, double dip recession risks will continue to run high if Congress doesn’t provide more fiscal relief and the health crisis isn’t over.”
On Thursday, the Philadelphia Federal Reserve is scheduled to release its report on regional manufacturing activity. The Philly Fed Index is expected to drop to 20.0 in December from 26.3 in November.