Manufacturing conditions in the U.S. Northeast deteriorated sharply in December, according to data published Monday by the Federal Reserve Bank of New York, catching economists off guard.
The New York Fed’s general business conditions index fell into negative territory, dropping to -3.9 in December from 18.7 in November. A reading below zero signals contraction in activity. Economists had been looking for a much milder slowdown, with forecasts centered around a positive 10.6 reading.
The sudden decline followed a strong rebound in November, when the index climbed to its highest level in a year, making December’s reversal particularly striking.
Despite the setback in current conditions, manufacturers reported improved confidence about the outlook. The future general business conditions index, which measures expectations for the next six months, rose sharply to 35.7 in December from 19.1 in November, suggesting firms anticipate a meaningful improvement ahead.