Manufacturing Gauge Slumps as Core Inflation Gains

A gauge of manufacturing in New York State showed the sector unexpectedly contracted for the second month in a row as new orders worsened, while core inflation rose at its highest pace in three years.

CNBC.com

The pace of manufacturing decline did moderate somewhat in July from the month before, with the New York Fed's "Empire State" general business conditions index rising to minus 3.76 from minus 7.79 in June. However, it was still weaker than expected, since economists polled by Reuters had expected a reading of 4.50.

The survey of manufacturing plants in the state is one of the earliest monthly guideposts to U.S. factory conditions. In June the regional index had tumbled sharply, contracting for the first time since November 2010, but the larger national report for the month showed a modest uptick in the pace of growth.

New orders fell to minus 5.45 from minus 3.61, while shipments improved to positive 2.22 from minus 8.02.

Employment gauges worsened with the index for the number of employees at its lowest level since December 2010, falling to 1.11 from 10.20, and the average employee workweek index tumbling to minus 15.56 from minus 2.04.

The outlook for the months to come was less gloomy with the index of business conditions six months ahead rising to 32.22 from 22.45. However, the level of optimism was well below levels seen earlier this year, the report said.

Meanwhile, consumer prices fell slightly more than expected in June to post their biggest drop in a year on weak gasoline costs, government data showed Friday, pointing to a cooling in commodity-driven inflation pressures.

The Labor Department said its Consumer Price Index fell 0.2 percent, the largest fall since June last year, after rising 0.2 percent in May. Economists polled by Reuters had expected prices to fall 0.1 percent.

But stripping out food and energy, core CPI rose 0.3 percent after a similar gain in May and above economists' expectations for a 0.2 percent increase.