Manufacturing in the New York region unexpectedly expanded in February, indicating the area’s factories are emerging from a slump that began in August.
The Federal Reserve Bank of New York’s general economic index climbed to 10, the highest since May 2012 and exceeding the highest forecast in a Bloomberg survey, from minus 7.8 in January. The median projection called for minus 2. Readings of less than zero signal contraction in New York, northern New Jersey and southern Connecticut.
Gains in orders, sales and employment during the month show manufacturing is starting to recover from a slowdown in the second half of 2012 after companies brought inventories more in line with demand. Sustained consumer spending and a pickup in equipment purchases by businesses will probably help fuel production gains and complement improvement in the housing market.
“The economy is getting poised for better times,” Ken Mayland, president of ClearView Economics LLC in Pepper Pike, Ohio, said before the report. Mayland is the top forecaster of the index for the past two years, according to data compiled by Bloomberg.
Stock-index futures trimmed losses after the report. The contract on the Standard & Poor’s 500 Index expiring in March fell 0.1 percent to 1,517.6 at 8:33 a.m. in New York. The index had declined as much as 0.3 percent.
Estimates in the Bloomberg survey of 50 economists for the February data ranged from minus 7 to a reading of 5.
The Empire State gauge of new orders increased to 13.3 in February, the highest reading since May 2011, from minus 7.2 in January. A measure of shipments climbed to 13.1 from minus 3.1 the previous month.
The index of prices paid climbed to 26.3 this month from 22.6, while prices received decreased to 8.1 from 10.8.
The measure of factory employment advanced to 8.1, the highest since August, from minus 4.3.
Factory executives in the New York Fed region were more optimistic about the future. The gauge measuring the outlook six months from now jumped to 33.1, the highest since April, from 22.4.
Manufacturing makes up about 12 percent of the U.S. economy and about 6 percent of New York’s.
Economists monitor the New York report and Philadelphia Fed factory readings, due Feb. 21, for clues about the Institute for Supply Management figures on U.S. manufacturing. The national report is scheduled for release March 1.
Higher global agricultural demand is boosting orders for farming equipment makers such as Deere & Co., the U.S. market leader, even as Congress struggles to compromise on the budget.
“Our near-term outlook is tempered by uncertainties over fiscal, economic and trade issues,” Susan Karlix, Deere’s manager of investor communications, said on a Feb. 13 earnings call. “This is hurting business confidence and restraining growth, but we continue to invest in the future, as the longer- term picture continues to be extremely bright.”
The Moline, Illinois-based company raised its full-year profit forecast and posted quarterly earnings that topped analysts’ estimates, according to a Feb. 13 statement. Farming receipts rose 5.4 percent to a record $219.6 billion in 2012 from a year earlier, the Department of Agriculture said Feb. 11.
Lawmakers have until the end of the month to come up with a way to avert $1.2 trillion in across-the-board spending cuts over 10 years, known as sequestration, set to take effect on March 1. The Obama administration has begun a public campaign to head off the cuts, which White House officials said will limit education outlays, small business loans, food safety inspections and defense.
Automakers may help fuel gains in orders. Cars and light trucks sold at a 15.2 million annual rate in January after 15.3 million in December, according to data from Ward’s Automotive Group. Including November’s 15.5 million rate, auto sales over the past three months have been the strongest in five years.
Ford Motor Co. and General Motors Co. are benefiting as consumers replace older cars and trucks. Ford’s deliveries surged 22 percent last month compared with January 2012 and General Motors’ sales climbed 16 percent, the companies reported Feb. 1.
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