Manufacturing activity in New York State unexpectedly collapsed in January, a survey from the Federal Reserve Bank of New York indicated on Tuesday.

“Business activity contracted sharply in New York State,” the New York Fed said.

The index of general business conditions in the state dropped to a minus 32.9 from minus 11.2 in December. Economists had predicted a slight improvement to minus 8.

That is the lowest level since the height of pandemic lockdowns in mid-2020 and the fifth worst reading in the history of the survey. Eleven percent of respondents reported that conditions had improved over the month, and forty-four percent reported that conditions had worsened.

New orders and shipments fell substantially, suggesting a collapse in demand. The new orders index plunged from minus 3.6 to minus 31.1, a 27.5 decline. The index of shipments dropped from +5.3 to -22.4.

The index of inventories held steady at 4.5, an indication that inventory levels increased slightly. Delivery times were unchanged. The unfilled orders index fell deeper into negative territory, suggesting a smaller backlog of orders.

The outlook does not call for much improvement. The index for future business conditions indicates executives expect little improvement over the next few months, although new orders and shipments are expected to rise from the deeply depressed current level.

The barometer of employment fell to its lowest level in more than two years, indicating that employment growth stalled. The average workweek continued to decline. Expectations for employment growth signaled only a modest rise over the next six months.

The index of input prices showed these continue to rise but at a significantly slower pace. The index tracking selling prices also declined, although it continues to show prices are moving up.

The New York Fed survey runs counter to most of the economic data over the past two weeks. Generally, this has shown that growth in employment has continued at a fast pace even while wage inflation has moderated. Consumer prices in December fell, although this was largely due to declining energy prices. Consumer sentiment improved by more than expected. The combination of these reports have raised hopes that the U.S. economy could achieve a “soft landing”—meaning, an end to the period of high inflation without a significant economic slump. The New York Fed survey weighs on the other side of the scale, indicating a sharper slowdown than expected.

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