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Business Title: New York Area Manufacturing Shrinks in August Manufacturing in the New York region unexpectedly contracted for a third straight month in August as orders and inventories dropped, a sign the industry that has led the economic recovery is at risk of stumbling. The Federal Reserve Bank of New York’s general economic index fell to minus 7.7 from minus 3.8 in July, a report showed today. The median forecast in a Bloomberg survey called for an index of zero, the dividing line between expansion and contraction. The so-called Empire State Index covers New York, northern New Jersey and southern Connecticut. Weaker demand from consumers and businesses, coupled with slowing growth in emerging economies and Europe, means factories are ratcheting down production. The Fed, in its policy meeting last week, said growth this year had been “considerably slower” than forecast and announced it would keep its benchmark lending rate near zero at least though mid-2013 to spur growth. “There are downside risks ahead for manufacturing particularly given that U.S. consumer spending is going to be weaker than a lot of people have been thinking, including the Fed,” said James Shugg, a senior economist at Westpac Banking Corp. in London. Stock-index futures trimmed earlier gains after the report. The contract on the Standard & Poor’s 500 Index maturing in September rose 0.3 percent to 1,180.6 at 8:50 a.m. in New York. Treasury securities were little changed. The measure of New York-area manufacturing last contracted for three straight months in the period ended in June 2009, during the last recession. Estimates in the Bloomberg survey of 55 economists ranged from minus 10 to 8.5. The headline 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 fell to minus 7.8 from minus 5.5 last month. A gauge of unfilled orders dropped to minus 15.2 from minus 12.2. A measure of shipments advanced to 3 from 2.2. The employment measure rose to 3.3 from 1.1. An index of prices paid dropped to 28.3 from 43.3 while prices received decreased to 2.2 from 5.6. Factory executives in the New York Fed’s district were also less optimistic about the future. The gauge measuring the outlook six months from now plunged to 8.7, the lowest reading since February 2009, during the depths of the recession, from 32.2. It was the third-lowest reading since records began in 2001. The group’s order outlook six months from now fell to the second-lowest level on record. Only the reading in September 2001 following the terrorist attacks was weaker. Manufacturing makes up about 12 percent of the U.S. economy and about 6 percent of New York’s. U.S. factory payrolls rose by 24,000 workers in July, according to Labor Department data, while the nation’s unemployment rate fell to 9.1 percent. Economists monitor the New York and Philadelphia Fed factory reports for clues about the Institute for Supply Management figures on U.S. manufacturing during the month. The Philadelphia report is due Aug. 18 and the national ISM report is due Sept. 1. Cars and light trucks sold at a seasonally adjusted pace of 12.2 million in July, up from 11.4 million in June yet trailing the 12.5 million average pace through the first half, Autodata Corp. said last week. Deliveries at Detroit-based General Motors Corp. climbed 7.6 percent from the same month in 2010 to 214,915. “Although the economy has clearly lost some momentum, we do believe that it will continue to recover, but more gradually than we had originally anticipated as we move through the second half of the year,” Don Johnson, GM’s vice president of U.S. sales, said on an Aug. 2 conference call. Allentown, Pennsylvania-based Air Products & Chemicals Inc. (APD), a maker of industrial gas and related equipment, on July 22 reported a 15 percent gain in net income from continuing operations from a year earlier. “We continued to see strong volume growth across a number of our businesses,” John McGlade, chairman and chief executive officer, said on a conference call. “Growth in the Asia Merchant business and more broadly in the energy and electronics markets was strong, while both the U.S. and Europe Merchant businesses were slower.”
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