Empire Manufacturing Growth Gained in December

Optimism for future business conditions rose to the highest level in nearly five years as growth in factory activity across New York state in December topped expectations, according to a report Thursday from the Federal Reserve.

The Empire State's general business conditions index came in at 9 this month, compared with 1.5 in November. Before stabilizing last month, manufacturers saw three consecutive months of contractions, represented by an index below zero. Economists surveyed by The Wall Street Journal had expected the index of 5.

American factory activity has been damped by weaker global demand, a strong dollar that makes U.S. goods more expensive abroad and an energy rout that has led to budget cuts across the oil sector. New orders index rose eight points to 11.4, although labor-market conditions remained weak, with respondent reporting declines in both employment and hours worked. Shipments were flat from last month.

Indexes for the six-month outlook surged to 50.2 from 29.9 last month, signaling that many manufacturers expect business conditions to improve in the coming months.

Write to Imani Moise at imani.moise@wsj.com