New York Area Factories Unexpectedly Expand at Fastest Pace Since June ’10

Manufacturing in the New York region expanded in February at the fastest pace since June 2010, a sign factories are propelling the expansion.

The Federal Reserve Bank of New York’s general economic index increased to 19.5 this month from 13.5 in January. The index exceeded all forecasts in a Bloomberg News survey of economists. Readings greater than zero signal expansion in the so-called Empire State Index, which covers New York, northern New Jersey, and southern Connecticut.

Investment in new equipment and inventory restocking this quarter will help keep American factories expanding even as slower global growth limits exports. A pickup in job creation that helps drive bigger gains in consumer spending may further fuel production.

“Given all that’s going on in the world, manufacturing is pretty healthy,” Paul Ashworth, chief U.S. economist at Capital Economics Ltd. in Toronto, said before the report. “We’ve seen a pretty marked turnaround in manufacturing.”

The median projection in the Bloomberg survey of 56 economists called for a gain to 15. Estimates ranged from 10 to 18.

The Empire State gauge of factory orders grew at a slower pace, easing to 9.7 this month from 13.7 in January. A measure of shipments increased to 22.8 from 21.7 and employment was little changed at 11.8 from 12.1.

Factory executives in the New York Fed’s district were less optimistic about the future. The gauge measuring the outlook six months from now declined to 50.4 from a one-year high of 54.9.

U.S. Manufacturing

Economists monitor the New York and Philadelphia Fed factory reports for clues about the Institute for Supply Management’s report on U.S. manufacturing. The Philadelphia Fed’s gauge, to be released tomorrow, rose two points to 9, according to the median estimate in a Bloomberg survey. The national ISM factory data will be released on March 1.

Manufacturing output, which makes up 12 percent of the U.S. economy and about 6 percent of the New York economy, has picked up after a lull in the third quarter as consumers purchased more cars and businesses boosted inventory levels.

Since November, “we’ve actually seen some improvements in backlogs,” Thomas Kadien, senior vice president of consumer packaging at International Paper Co., said on a Feb. 2 conference call. “For at least the last three weeks, we’ve felt very good about the demand. From a North American perspective, the softness is behind us, and we feel much better about the first quarter.”

To contact the reporter on this story: Alex Kowalski in Washington at akowalski13@bloomberg.net

To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net

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