The January New York Empire manufacturing index declined to 6.5 from a revised 7.6 the previous month, which was originally reported as 9.0 and was also below consensus expectations of a smaller retreat to 8.5.
The orders component declined to 3.1 from 10.4 previously, while the shipments index edged lower to 7.3 from 8.6. The unfilled orders index improved for the month, but remained in negative territory at -1.3, while there was a gain in inventories for the first time in more than a year after a sharp monthly increase in the index.
Although there was an improvement in the employment index it remained in negative territory at -1.7 and the average workweek index was -4.2 from -7.0 previously.
Upward pressure on prices continued with the prices paid index rising to 36.1 from 22.6, which was the highest reading since 2014. The prices received index also increased sharply to 17.6 from 3.5 previously.
Confidence in the six-month outlook remained very strong with the index at 49.7, unchanged from the previous month. Delivery times were expected to be longer with higher inventories. Companies also expected to increase employment and lengthen the work week over the next six months with prices received and prices paid expected to rise at a faster pace.
The data overall will maintain confidence in the overall manufacturing outlook and the main feature is evidence of a further increase in inflationary pressures, especially for prices received, which will keep the Fed on high alert over inflation trends. There was no immediate evidence that a stronger dollar has curbed inflationary pressure, although the orders index could indicate some slight impact.