May 15 (Bloomberg) -- Manufacturing in the New York region this month contracted the least since August and the six-month outlook improved for a third straight month, indicating the decline in factory production may be slowing.

The Federal Reserve Bank of New York’s general economic index rose to minus 4.6, better than forecast, from minus 14.7 the prior month, the bank said today. Readings below zero for the Empire State index signal manufacturing activity is shrinking.

A global recession is slowing demand for American-made goods, making it harder for U.S. companies to boost exports to counter the domestic downturn. Still, businesses may not make deep cuts to inventory this quarter after paring stockpiles at the fastest pace on record from January through March.

“Although the demand for manufactured goods is still falling, it is doing so at a much slower pace, suggesting a bottom in manufacturing may be near,” Steven Wood, president of Insight Economics LLC in Danville, California, said before the report.

Economists projected the Empire State index would climb to minus 12, according to the median of 43 estimates in a Bloomberg News survey. Forecasts ranged from minus 5 to minus 23.2.

Factory executives in the New York Fed’s district, which encompasses New York state, northern New Jersey and one county in Connecticut, turned more optimistic about the future. The gauge measuring the six-month manufacturing outlook jumped to 43.8, the highest since October 2007, from 33.1.

Economic Outlook

A Bloomberg survey of users on six continents showed confidence in the global economy rose to the highest level in 19 months. The Bloomberg Professional Global Confidence Index climbed to 38.72 in May from 21.2 in April, the biggest increase since the survey began in November 2007. A reading below 50 means pessimists outnumber optimists.

The New York Fed’s measure of new orders decreased to minus 9 and a gauge of shipments rose to 1.3 from minus 1.8. The index of inventories increased to minus 21.6 from minus 36.

The index of prices paid improved to minus 11.4, and the gauge of prices received decreased to minus 27.3 from minus 18. A measure of employment rose to minus 23.9 from minus 28.1.

Today’s report is one of the earliest measurements of regional manufacturing this month. The Philadelphia Fed report, due out next week, may show manufacturing in that region contracted at a slower pace in May, according to the Bloomberg survey median.

Job Cuts

Weak global demand and falling commodity prices are hurting U.S. companies, forcing factory owners to cut jobs. U.S. manufacturers reduced payrolls by 149,000 workers last month, following the 167,000 jobs cut in March, according to data from the Labor Department.

Economists surveyed by Bloomberg News March 30 to April 8 projected the U.S. jobless rate will exceed 8 percent through 2011.

Intel Corp., the world’s largest chipmaker, is getting orders that are “a little better than expected” in the second quarter, Chief Executive Officer Paul Otellini said May 12. “A lot depends on June,” Otellini said at a meeting at the company’s Santa Clara, California, headquarters.

Last month, the company said first-quarter profit fell 55 percent because of slowing computer demand and signaled sales won’t recover in the current period.

To contact the reporter on this story: Timothy R. Homan in Washington at thoman1@bloomberg.net

Last Updated: May 15, 2009 08:30 EDT