June 15, 2010 / 1:29 PM / 10 years ago

NY manufacturing grows as import prices slip

NEW YORK (Reuters) - Manufacturing in New York state grew in June even as hiring slowed, supporting views the factory sector is recovering, while import prices recorded their largest decline in nearly a year in May.

The data is the latest sign of strength in manufacturing and follows recent U.S. reports suggesting the rebound may be losing momentum, including one showing U.S. private employers hired fewer workers than expected in May and another showing a surprise decline in May retail sales.

The Empire State general business conditions index edged up to 19.57 in June from 19.11 in May, the report from the New York Federal Reserve said on Tuesday. The June reading was slightly below what economists polled by Reuters had forecast.

However, the index for the number of employees fell in June from May.

“The manufacturing recovery remains fairly strong. It supports the view that the fiscal crisis in Europe has not impacted on the U.S. economy for now,” said Paul Dales, U.S. economist at Capital Economics in Toronto.

Moody’s Investors Service downgraded Greece’s debt rating to junk status on Monday, underscoring fears about the effect of Europe’s debt woes on the global recovery. A poll on Tuesday showed German analyst and investor sentiment fell in June by the most since the height of the financial crisis in 2008.

A separate report released on Tuesday showed U.S. import prices declined in May as petroleum costs plummeted, bolstering projections of tame inflation and low interest rates.

Import prices fell 0.6 percent, the biggest decline since July, after rising by a revised 1.1 percent in April, the Labor Department said.

Strength in the U.S. dollar is also helping to keep inflation pressures muted and this should allow the Fed to renew its low interest rate pledge at next week’s monetary policy-setting meeting.

U.S. stocks .SPX rose sharply, boosted by gains in the euro, which hit a two-week high against the dollar. U.S. Treasury debt prices were mostly flat.

Adding to disappointment for the retail sector, electronics chain Best Buy Co (BBY.N) reported earnings and revenue that missed Wall Street’s consensus forecasts, citing a decline in prices for televisions.

Another economic report issued on Tuesday showed U.S. homebuilder sentiment fell in June by the sharpest amount since the height of the financial crisis as the homebuyer tax credit expired.

The National Association of Home Builders said the NAHB/Wells Fargo Housing Market index dropped 5 points to 17, the sharpest point decline since November 2008.

“This shouldn’t come as any huge surprise with the end of the home-buyer tax credit. We are going to see a few months of weakness,” said Gus Faucher, director of macroeconomics at Moody’s Analytics in West Chester, Pennsylvania.

Credit card delinquencies, however, are also falling. Capital One Financial Corp (COF.N) and several other credit card companies said 30-day delinquency rates for credit cards fell in May to their lowest levels this year.


May’s decline in import prices, although less than economists’ expectations of a 1.2 percent fall, was the first drop since February.

April import prices were previously reported to have increased 0.9 percent. In the 12 months to May, import prices rose 8.6 percent.

The monthly decline in import prices reflected a 5.0 percent fall in the cost of imported petroleum and petroleum products, the largest drop since December 2008, after a 3.7 percent gain in April.

Excluding petroleum, import prices rose 0.5 percent after rising by the same margin in April.

Export prices were lifted by agricultural products, foods and industrial supplies and materials. The year-on-year gain in export prices was the largest since September 2008.

Despite persistent concerns about the recovery, many economists and strategists have said they do not expect the U.S. economy to fall back into recession soon.

“In my view in the U.S., we’re going to avoid a double-dip recession,” but second-half growth “is going to be below 2 percent,” economist Nouriel Roubini said on CNBC.

Additional reporting by Lucia Mutikani and Corbett Daly in Washington and Wanfeng Zhou, Richard Leong and David Gaffen in New York; Editing by Dan Grebler

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