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Manufacturing in NY contracts sharply in August, NY Fed says

Manufacturing activity in New York State contracted in August at the fastest pace since the Great Recession, the Federal Reserve Bank of New York said Monday.

On Long Island, a representative of a defense and aerospace manufacturing group said any slowdown here appears to be seasonal.

The New York Fed said that its Empire State manufacturing index plunged to minus 14.9 from a positive reading of 3.9 in July. That is the lowest level since April 2009. Any reading below zero indicates contraction.

A gauge of new orders fell to minus 15.7 from minus 3.5, while a measure of shipments dropped to minus 13.8 from positive 7.9. A measure of employment slipped to 1.8 from 3.2, suggesting companies are adding fewer workers.

While that reported contraction is sharp, Jamie L. Moore, president of the Aerospace and Defense Diversification Alliance in Peacetime Transition (ADDAPT), a Hauppauge-based trade group representing manufacturers in the aerospace and defense industry, said that companies within his organization are used to seasonal slowdowns around this time or year.

A combination of government officials delaying purchases until September combined with many taking vacation time usually leads to a slowdown in defense manufacturing, he said.

"I haven't heard any major concerns or issues signaling that there's some cause behind it that's abnormal," said Moore, who added that some manufacturers voluntarily stop operations for a few weeks in July and August to save on energy costs.

U.S. manufacturers have been struggling with a variety of headwinds, including weak overseas economies in Europe and China, that have cut into exports.

The dollar has also risen about 20 percent in value in the past year, which can also reduce exports by making them more expensive.

Cheaper oil, meanwhile, has reduced demand for steel pipe and other drilling equipment.

Yet, some observers were skeptical about the Empire State figure, since recent nationwide manufacturing data have shown signs of rebounding.

"Given the limited manufacturing base in the New York area, we take this morning's negative surprise with a grain of salt," Barclays Capital economist Jesse Hurwitz said in a research note.

"I don't think there's any indication that the sky is falling in any way," said William Wahlig, executive director of the Long Island Forum for Technology, a Bethpage-based manufacturing advocacy group. In some respects, such as worker retention, Wahlig said, Long Island has remained fairly steady since the recession, partly due to sector diversification.

"Even though certain sectors are seeing a decline, it's being offset by growth in other sectors," he said.

Nationwide, factories are boosting output on the back of stronger domestic demand. Employers have added nearly 3 million jobs in the past 12 months, enabling more Americans to spend on large items such as autos.

With Victor Ocasio


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