Manufacturing in the New York region expanded in March at the fastest pace since June 2010, indicating factories are still driving the expansion.
The Federal Reserve Bank of New York’s general economic index unexpectedly increased to 20.2 this month from 19.5 in February. The median forecast in a Bloomberg News survey of economists was 17.5. 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.
“The economy is gaining momentum and gaining breadth,” John Herrmann, president of Herrmann Forecasting LLC in Summit, New Jersey, said before the report. “Manufacturing is benefitting from consumers pulling back so much in the past few years. There’s just this big replacement demand.”
Estimates in the Bloomberg survey of 56 economists ranged from 12 to 25.
The Empire State gauge of factory employment climbed to a 10-month high of 13.6 in March from 11.8. A measure of factory orders eased to 6.8 this month from 9.7 in February. A gauge of shipments decreased to 18.2 from 22.8.
The Fed’s index of prices paid jumped to 50.6 in March, the highest since June, from 25.9 a month earlier, and a measure of the factory workweek climbed to a 10-month high of 18.5 from 7.1.
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 47.5 from 50.4.
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 today at 10 a.m. New York time, rose to 12 from 10.2 in February, according to the median estimate in a Bloomberg survey. The national ISM factory data will be released on April 2.
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.
That’s prompting some manufacturers to add more workers. Caterpillar Inc., the world’s largest construction and mining-equipment maker, said yesterday in a statement that it plans to expand a manufacturing plant in Sumter, South Carolina, by adding 170,000 square feet and more than 80 jobs.
Fed policy makers meeting in Washington this week said “labor market conditions have improved further.”
“The unemployment rate has declined notably in recent months but remains elevated,” Federal Open Market Committee members said in a March 13 statement. “Household spending and business fixed investment have continued to advance.”