New York manufacturers say business activity shrank for the first time in nearly two years, according to the Federal Reserve Bank of New York's Empire State Manufacturing Survey released Monday.
The Empire State's business conditions index tumbled to -3.58 in December from 10.16 in November. A reading above zero indicates expansion, while negative readings reflect contraction.
Economists surveyed by The Wall Street Journal had expected the latest index to rise to 14.
"Overall, readings for the headline index during the fourth quarter of 2014 mark a significant downshift in activity from the levels seen during the five-month period from May through September," the report said.
The Empire subindexes showed broad-based declines in December.
The new-orders index sank to -1.97 this month from 9.14 in November, while the shipments index also slipped into negative territory, to -0.22 from 11.83.
Inventories contracted, sliding to -11.46 from zero last month.
Labor indicators for the region deteriorated as well, with the index for the number of employees edging down to 8.33 in December from 8.51. The average workweek fell to -11.46 from -7.45.
The prices-paid index receded a bit to 10.42 from 10.64. The prices-received index bounced back to 6.25 from flat in November, indicating a pickup in the pace of increases in selling price.
The generally downbeat view on current conditions were paired with a softening of outlooks on business activity.
The general business-conditions expectations index for the next six months slipped to 38.58 this month after rising to 47.61 last month, though the New York Fed said the reading remains "fairly high" by historical standards.
The new-orders expectations index declined to 38.42 from 46.99, while shipment expectations dropped to 37.92 from 44.68.
The employee-expectations index fell to 20.83 from 24.47, although the average employee workweek-expectations index improved to 12.5 from 8.51 in November.
Spending expectations pulled back as well, with the capital expenditure-outlook index falling to 15.63 from 27.66.
The New York Fed survey is the first factory report released by regional Fed banks. Economists use the surveys as guideposts to forecast the health of the national industrial sector as captured in the monthly manufacturing report done by the Institute for Supply Management.