Manufacturing in New York state shrank for the first time in seven months in May, as new orders fell and shipments grew more slowly.
The Federal Reserve Bank of New York said Monday that its Empire State manufacturing index dropped last month to minus one, from 5.2 in April. Any reading below zero signals contraction.
The index measures sentiment in New York, but is followed by economists because it provides an early read on factory output nationwide. U.S. factories have been expanding since the fall, after an 18-month slump caused by low oil prices, which lowered demand for drilling equipment.
The figures suggest that factory activity could be leveling off, though economists weren’t overly worried. Americans pulled back on their car purchases in April. And the dollar is still elevated against most other developed world currencies, compared with a year ago, which limits exports.
Ian Shepherdson, chief economist at Pantheon Macroeconomics, said the index’s decline was “disappointing, but not disastrous.”
“The big picture in the industrial economy remains one of gradual recovery in the wake of the gentle upturn in capital spending in the oil sector,” he said. Drillers have begun ordering more equipment to set up new rigs as oil prices have leveled off.
The new orders index tumbled to minus 4.4 from 7, while the shipments index declined to 10.6 from 13.7. A gauge of hiring slipped to 11.9, still a solid reading, from 13.9.
A broader measure of manufacturing nationwide showed that U.S. factories grew in April for the eighth straight month. The Institute for Supply Management, a trade group of purchasing managers, said its manufacturing index declined to 54.8 from 57.2. But any reading above 50 points to growth. Factory production — which is one part of the index — actually accelerated.