Empire State Manufacturing Remains in Contraction

Business conditions in the state of New York remained weak in December, extending a five-month streak of deterioration, according to the Federal Reserve Bank of New York. Higher shipments, though, helped stem the overall pace of decline. The Empire State's business conditions index for December rose to -4.6 from -10.7 in November and -11.4 in October. Economists surveyed by The Wall Street Journal expected a smaller improvement -6.85. A reading above zero reflects expansion; a reading below that level denotes contraction. Shipments rose for the first time since the summer, pushing the shipments gauge about 10 points higher to 5.5. While the overall index managed to improve more than economists anticipated, it remained firmly in negative territory, weighed down by labor market measures, inventories and orders. Labor market conditions deteriorated noticeably, the report said, with the index measuring the number of employees dropping nine points to -16.2 alongside a sharp decline in the average workweek to a six-year low. That comes in contrast to other labor market gauges, including rising nonfarm payrolls and historically low initial jobless claims, which have painted a brighter picture of the nation's job market. The U.S. manufacturing sector remains under pressure from weaker global demand and from the stronger U.S. dollar, which makes exports more expensive. Recent reports from some pockets of the country have shown modest improvement, though producers in the northeast have continued to report unfavorable conditions. The New York Fed survey is the first monthly factory report released by regional Fed banks. Economists use the Fed surveys to forecast the health of the national industrial sector as captured in the monthly manufacturing report released by the Institute for Supply Management, next due out Jan. 4. Write to Lisa Beilfuss at lisa.beilfuss@wsj.com