Manufacturing activity across New York state regained momentum in June, reversing last month's decline and the latest evidence of the sector's shaky recovery.
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The Empire State's business conditions index jumped to 6.0 from -9.0 last month, when it snapped two months of improvement after seven straight months of contraction.
The rise back into positive territory wasn't expected. Economists surveyed by The Wall Street Journal expected the index to register at -5.0.
The New York area report is the first in a string of manufacturing surveys conducted by regional Federal Reserve Banks, looked to by economists and traders for clues about the health of the national economy.
Factories across the country has been hurt by slowing demand as economies around the world struggle, and a stronger U.S. dollar has hurt exporters while lower energy prices have bit into many firms' capital budgets. While those headwinds haven't altogether disappeared, a break in the dollar's climb and improvement in the price of oil had relieved some pressure from American producers.
Across New York this month, demand picked up and factory owners turned more optimistic about future prospects. A gauge of new orders surged 16 points to 10.9, and the survey's shipments index in turn climbed 11 points to 9.3. A measure of inventories, meanwhile, dropped further into negative territory, suggesting manufacturers may need to replenish stocks as demand improves.
Looking ahead, producers' outlook rose to the best level this year. A gauge of expected business conditions six months out gained 10 points to 34.8 as demand and shipment projections jumped. After a sharp decline last month, the survey's capital expenditures index rose eight points to 11.2.
Despite the broad improvement, factory owners continued to express reluctance over hiring. Last month, the manufacturing sector shed 10,000 positions. Factories continue to look for signs that the recovery is sticking, and some have reported difficulties in finding qualified workers as the labor market tightens.
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