Manufacturing activity in the New York slowed markedly in January, sinking to its lowest level since the summer of 2005, the New York Federal Reserve Bank said.
The decline, which brought the Empire State index to 9.1 in January from a revised 22.2 in December, was sharply below economist estimates. On average, Wall Street was expecting the index to slip to 20.0 from the initial reading of 23.1 in December.
The new orders, shipments and employment indexes fell sharply, while the inventories index dropped to its lowest level in well over a year.
Economists look to the regional manufacturing surveys for clues to what is ahead with the closely watched national survey of factory activity from the Institute for Supply Management. That survey is due out in two weeks.
"This is the first regional manufacturing survey to be released, and, thus, we are hesitant to draw significant ISM implications," said Phillip Neuhart, an economic analyst at Wachovia Economics Group.
In December, the ISM manufacturing climbed back above 50, a sign of expanding activity, after falling below the benchmark for the first time in five years in November.
In January, the new orders index fell to 10.3 from 22.5 in the previous month.
"Unfilled orders remained negative for the second consecutive month, indicating continued thinning of manufacturers' pipeline," Neuhart said.
Shipments fell to 16.1 from 27.6 in December.
The employment index dropped to 6.9 in January from 18.6 in the previous month. The prices paid index rose to 35.1 from 28.1 in December, its highest level since September.
"All in all, this report is consistent with the story o fmoderating growth in the manufacturing sector," Neuhart said.