The New York Fed’s Empire State business conditions index took a sharp turn for the worse in June, falling into negative territory for the first time in more than two years.
The Empire State manufacturing index plummeted 26.4 points to negative 8.6 in June, the New York Fed said Monday. That’s a record decline. Economists had expected a reading of positive 10, according to a survey by Econoday.
Any reading below zero indicates a contraction in activity. The last time the index was negative was in October 2016.
There was broad-based weakness in the report. A key metric, the new-orders index, sank 21.7 points to -12 in June. Shipments fell 6.6 points to 9.7. Unfilled orders also fell sharply and inventories sank into negative territory. The index of future activity fell only 4.9 points to 25.7 in June.
Manufacturing has been a weak link in the economy this year, buffeted by uncertainty caused by tough U.S. trade policy against China and Mexico and a slowing of activity overseas. Auto sales are set to be lower this year. The large pullback might bolster the case for an interest-rate cut when Federal Reserve officials meet on Tuesday and Wednesday.