Manufacturing activity in the region of the New York Federal Reserve fell for a fifth straight month in December. While this is a weak reading, it takes a back seat to the inflation reading ahead of Wednesday’s FOMC decision on whether to finally raise interest rates. Still, the December 2015 Empire State Manufacturing Survey showed that the pace of the drop in New York manufacturing activity did slow somewhat.

The headline general business conditions index, though still negative, moved up six points to -4.6. Bloomberg was calling for a reading of -7.00, and Dow Jones (via the Wall Street Journal) called for a consensus estimate of -6.85. The headline reading in October was -10.74.

One key issue here is that the rate of new orders continued to drop, but shipments increased for the first time since the summer.

On the inflation front, the price indexes suggested that input prices increased slightly, while selling prices remained slightly lower.

Bad news for jobs: Labor market conditions deteriorated noticeably, with survey indicators pointing to a sharp decline in both employment levels and hours worked.

Better times ahead? Indexes for the six-month outlook increased markedly, suggesting more widespread optimism about future business conditions.

Individual index data were as follows:

• Nearly 25 percent of respondents reported that conditions had improved over the month, while 29 percent reported that conditions had worsened.
• Although the new orders index remained negative at -5.1, suggesting that orders continued to fall, the shipments index rose almost ten points to 5.5 (first increase in shipments since the summer).
• The unfilled orders index rose two points to -16.2, and the delivery time index rose nearly three points to -8.1.
• The inventories index increased five points to -12.1, indicating ongoing reduction in inventory levels.
• The prices paid index was little changed at 4.0.
• Selling prices declined for a fourth consecutive month, with the prices received index remaining close to recent levels at -4.0.
• Labor market conditions deteriorated noticeably as the index for number of employees was negative for a fourth consecutive month. This fell 9 points to -16.2.
• The average workweek index plunged by some points to -27.3, its lowest level since early 2009.
• Indexes for the six-month outlook increased markedly this month, suggesting more widespread optimism about future business conditions.
• The index for future business conditions jumped eighteen points to 38.5, and the indexes for future new orders and future shipments also rose sharply.
• Labor market conditions were expected to improve, with the index for expected number of employees little changed at 15.2.
• The index for expected workweek rising to 10.1.
• The capital expenditures index rose by 3 points to 16.2, and the technology spending index increased 7 points to 9.1.

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