Manufacturing in the New York region sped up in February, a sign factories continue to drive the economic expansion.
The Federal Reserve Bank of New York’s general economic index rose to 15.4 from 11.9 in January. Economists projected an increase to 15, based on the median forecast in a Bloomberg News survey. Readings greater than zero signal expansion in the so-called Empire State Index, which covers New York, northern New Jersey, and southern Connecticut.
Manufacturers will probably keep benefitting from gains in business investment in new equipment and rising exports that reflect improving global growth and a weaker dollar. Increased consumer spending may give factories another boost that will bolster production and hiring.
“Manufacturing has accelerated strongly out of the final months of last year and started 2011 with quite a bit of momentum behind it,” said Paul Ashworth, the chief U.S. economist at Capital Economics NA Ltd. in Toronto, who forecast the gauge would climb to 15. “We’ve still got some strong growth globally that’s helping manufacturing exporters.”
Sales at U.S. retailers rose less than forecast in January, depressed by a drop in demand at building material stores and restaurants that may reflect the influence of harsh winter weather. Purchases increased 0.3 percent, the smallest gain since a drop in June and followed a 0.5 percent December gain that was less than previously estimated, Commerce Department figures showed today in Washington.
U.S. stock futures declined after reports showed retail sales increased less than forecast last month and prices of imported goods climbed. Futures on the S&P 500 expiring in March lost 0.2 percent to 1,324.5 at 9:02 a.m. in New York. The yield on the 10-year note was little changed at 3.62 percent.
Before release of the manufacturing index, estimates of 56 economists in the Bloomberg survey ranged from 11 to 21.
Nine components of the index rose this month. The Empire State gauge of new factory orders decreased to 11.8 from 12.4 last month, a measure of shipments decreased to 11.3 from 25.4 and employment fell to 3.6 from 8.4.
Today’s report showed an index of prices paid rose to 45.8 from 35.8 in January, while prices received increased to 16.9 from 15.8.
Factory executives in the New York Fed’s district were less optimistic about the future. The gauge measuring the outlook six months from now fell to 49.4 from 59.
“We know the price of many commodities, particularly energy commodities, are going up quite sharply,” Ashworth said. “It appears at the moment to be hitting profit margins rather than being passed onto consumers -- that doesn’t mean it won’t be passed on another few months.”
“Overall demand is still pretty soft so it’s going to be a challenge to pass those costs on,” he said.
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 Fed’s report is due Feb. 17. The national ISM factory data will be released on March 1.
Overseas demand for American goods is helping support manufacturers. Exports rose 1.8 percent in December to the highest level since July 2008, according to Commerce Department data released Feb. 11. For all of last year, exports increased 17 percent, the biggest one-year gain since 1988.
Biggest U.S. producer
New York-based Alcoa Inc., the biggest U.S. aluminum producer, expects demand for the metal to double by 2020, driven by consumption in Asia, Brazil and the Middle East, according to Chief Executive Officer Klaus Kleinfeld.
“We see places like China continuing to lead with growth of 21 percent last year, 13 percent this year,” Kleinfeld said in an interview Jan. 26. “We actually see that places like Southeast Asia, Brazil, Middle East are increasing the growth rate.”
Consumer spending in the U.S. will rise 3.2 percent this year, the biggest gain since 2005, according to the median estimate of economists in a Bloomberg News survey this month.
Manufacturing makes up 11 percent of the U.S. economy and about 6 percent of New York’s. Factories boosted payrolls by 49,000 workers in January, the most since August 1998, according to Labor Department data.