The backdrop for New York manufacturers took a noticeable turn for the better in October, according to the latest reading from the New York Federal Reserve.
The bank’s general business conditions index surged 9 points, to 22.9 in October from 13.8 in September. The shipments index continued its climb, hitting 22.5, and while the new-orders index fell for a second straight month, it remains positive, at 11.8, down 2 points from September.
Prices paid, meanwhile, dropped sharply, hitting its lowest level in more than a year, and the prices received index rose slightly.
In the latest survey, manufacturers were asked about their plans for 2007 capital spending, and almost 45 percent of responding firms said they plan to invest more next year than in 2006. Manufacturers said they plan to boost investment in equipment – particularly non-computer-related equipment – but maintain spending on structures at about 2006 levels.
The New York Fed said the most widely cited contributor to increased capital spending was a need for labor-saving equipment, followed by strong sales trends. For the companies that expect to reduce overall capital spending – about one-fifth of the survey – the most common reason was a return to more normal levels in 2007 following unusually high investment in 2006. A number of respondents also noted foreign competition as a negative contributor.
As for the future, the level of optimism among manufacturers fell in October, down 5 points to 30.2. Forty-seven percent of respondents expect conditions to improve over the next six months and 17 percent see conditions worsening.