New York Fed Factory Index Unexpectedly Rose in April

New York Fed Factory Index Unexpectedly Rose in April

April 15 (Bloomberg) -- A measure of manufacturing in New York state unexpectedly showed growth in April as new orders and shipments improved.

The Federal Reserve Bank of New York's general economic index rose to 0.63 from a March reading of minus 22.2 that was the lowest on record, the bank said today. Readings below zero signal contraction. The New York Fed began its Empire index in 2001.

The gains signal that the weakness in March's report may have been overstated and that exports may still be helping some companies counter sluggish domestic demand. Even so, a measure of expectations for six months from now fell, indicating that manufacturing may remain a drag on the economy.

``It looks like manufacturing is being supported by still- strong exports,'' said Zach Pandl, an economist at Lehman Brothers Holdings Inc. in New York. ``We still think manufacturing is going to weaken as consumer spending slows.''

Treasuries fell after the report, pushing yields higher. The benchmark 10-year note yielded 3.55 percent as of 8:42 a.m. in New York, up 4 basis points from yesterday.

Economists had forecast the New York Fed gauge would rise to minus 17 this month, according to the median of 43 estimates in a Bloomberg News survey. Projections ranged from minus 4 to minus 25.

Producer Prices Jump

Another report showed prices paid to U.S. producers rose almost twice as much as forecast in March, reflecting higher fuel and food costs that threaten a pickup in inflation.

The 1.1 percent gain followed a 0.3 percent increase in the prior month, the Labor Department said today in Washington. So- called core producer prices that exclude fuel and food increased 0.2 percent, as forecast.

The New York Fed's index of prices paid rose to 57.3, the highest reading since November 2005, from 50.6, while a gauge of prices received rose to 20.8 from 15.7.

An index of expected business conditions six months from now fell to 19.6 from 25.8 as manufacturing executives anticipated higher costs and less hiring.

A measure of current new orders rose to 0.06 from minus 4.7 in March. The shipments gauge rose to 17.5, the highest since December, from minus 5.2.

Unfilled Orders Decrease

A gauge of unfilled orders decreased to minus 6.3 from 1.1 in March, while the index of inventories increased to minus 4.2 from minus 4.5.

The employment index fell to zero from 4.5 a month earlier, the New York Fed said.

Today's report provides one of the month's earliest signals to the state of U.S. manufacturing. A similar survey from the Philadelphia Fed is scheduled to be released on April 17.

The Fed is scheduled to release its industrial production report for March tomorrow. Economists surveyed by Bloomberg News forecast that measure would decline 0.1 percent.

Nationwide, manufacturing contracted less than forecast in March, according to the Institute for Supply Management survey released April 1. The report helped ease concern that slower consumer spending and business investment will cause a deeper economic slump.

Other reports present a more threatening picture. The Reuters/University of Michigan preliminary consumer sentiment survey for April showed confidence fell to the lowest level in 26 years. In addition, the share of respondents who reported hearing about unfavorable changes in business conditions was 115 percent, the reading on record, JPMorgan Chase & Co. economist Michael Feroli said.

Those unfavorable conditions include tighter lending standards that have made it harder for companies to borrow money and reduce the value of some of the assets they own.

General Electric Co. cut its annual forecast April 11 and said its profit fell for the first time since 2003. Chief Executive Officer Jeffrey Immelt blamed the drop in first- quarter earnings on a seize-up in capital markets that forced GE to write down the value of loans and Chinese securities it held and thwarted some asset sales in the period's final two weeks.

BLOOMBERG