NY Fed factory index drops sharply in May

Factory sector activity in and around the state of New York worsened sharply in May, the results of a closely followed survey revealed.

The Federal Reserve Bank of New York's regional factory index dropped from a reading of 10.8 for April to -31.8 in May (consensus: -4.0).

A sub-index linked to businesses' new orders fared particularly badly, cratering from 25.1 to -28.0.

Yet a gauge for the prices paid by firms edged up from 33.0 to 34.9.

Hiring also improved a touch with the corresponding sub-index rising from -8.0 to -3.3.

The N.Y. Fed's jurisdiction covered New York state, the 12 northern counties of New Jersey, Fairfield County in Connecticut, Puerto Rico and the U.S. Virgin Islands.

Commenting on the survey results, Kieran Clancy at Pantheon Macroeconomics described them as "more noise than signal, but still not good".

May's reading more than reversed the previous month's surprise spike, which wasn't reflected in other regional Fed surveys, he said.

But what most caught his eye was the "alarming" slump in the sub-index for capital spending intentions by almost 16 points to 0.9.

"Hopes for a sustained recovery in manufacturing rest on the pull to global industry from China’s post-Covid recovery, given the intense pressure on the domestic economy from the Fed’s actions and now the banking crisis," he said.

"[...] For now, U.S. manufacturing appears to be on its own, and struggling."