August NY Fed manufacturing index contracts, first time in 10 months

NEW YORK (Reuters) - A gauge of manufacturing in New York state unexpectedly contracted in August for the first time in 10 months as new orders shrank further, the New York Federal Reserve said in a report on Wednesday.

The New York Fed's "Empire State" general business conditions index dropped to minus 5.85 from 7.39 in July, missing expectations for 6.5.

It was the first time since October 2011 that the index was below zero, the threshold that indicates contraction in the sector.

The New York Fed survey of manufacturing plants in the state is one of the earliest monthly guideposts to U.S. factory conditions.

After helping to support the economic recovery, manufacturing has seen signs of weakness, with the larger national report showing the sector contracted in June and July.

"I'm not impressed with the Empire State being lower like that, and that's fresh data, too," said Frank Lesh, a futures analyst and broker at Futurepath Trading LLC in Chicago.

U.S. stock index futures held losses immediately after the data, while Treasuries prices pared losses and the dollar trimmed gains against the euro.

New orders worsened to minus 5.50, the lowest since September, from minus 2.69.

Shipments tumbled to 4.09 from 10.28 and inventories slid to minus 8.24 from zero.

Employment gauges were mixed. The index for the number of employees slipped to 16.47 from 18.52 while the average employee workweek index nudged up to 3.53 from zero.

The index of business conditions six months ahead fell to 15.20 from 20.20.

(Reporting by Leah Schnurr; Additional reporting by Edward Krudy; Editing by Theodore d'Afflisio)