By Bob Willis Dec. 15 (Bloomberg) -- Manufacturing in New York contracted in December at the fastest pace on record as orders and shipments remained weak. The Federal Reserve Bank of New York’s general economic index fell to minus 25.8, the lowest level since records began in 2001, from minus 25.4 in November, the bank said today. Readings below zero for the Empire State index signal manufacturing activity is shrinking. Factories are scaling back production as consumers retrench in the face of a weaker job market and a recession that began a year ago. A deepening global credit crisis has hit overseas trading partners, undermining foreign demand for U.S. goods. “As global demand cools, that will work with soft domestic demand to create a very weak environment for U.S. manufacturing,” Tim Quinlan, an analyst at Wachovia Corp. in Charlotte, North Carolina, said before the report. “The help we were getting from the export machine is no longer running at the same speed.” The Empire State index was projected to fall to minus 28, according to the median of 40 estimates in a Bloomberg News survey. Projections ranged from minus 17.5 to minus 36. The gauge measuring the manufacturing outlook for six months from now rose to 19.5 from 13 the prior month. The Commerce Department reported last week that retail sales fell 1.8 percent in November, the fifth straight month of declines and a sign that slack demand will further discourage producers. Orders, Shipments The New York Fed’s measure of new orders rose to minus 20.8 from minus 22.2 the prior month. A gauge of shipments increased to minus 8.8 from minus 13.9. The report also showed inflation eased. The index of prices paid for raw materials decreased to minus 7.5 from 20.5 and the gauge of prices received dropped to minus 11.7, the lowest since July 2003, from 6. A measure of employment rose to minus 23.4 from minus 28.9, the lowest reading since December 2001. Today’s report is one of the earliest regional takes on manufacturing this month. A report from the Philadelphia Fed, due Dec. 18, may show manufacturing in the region contracted in December for the 12th time in the last 13 months, according to the Bloomberg survey median. Later today, the Fed may report that industrial production including mining and utilities fell 0.8 percent in November after an October gain of 1.3 percent, the survey median shows. Auto Sales Weak spending, exacerbated by the worst credit crisis in seven decades, pushed car sales in November to their lowest monthly level since 1982, underscoring calls for a government bailout for General Motors Corp. and Chrysler LLC to avoid pushing them into bankruptcy. Other manufacturing companies are also hurting. Eastman Kodak Co., the 128-year-old photography company based in Rochester, New York, last week cut its 2008 sales and profit forecasts for the second time in six weeks, citing a deepening global recession. “The company has seen the dramatic slowdown in consumer spending continue and worsen” in recent weeks, while commercial customers were finding it “increasingly difficult to secure financing” for equipment purchases, Kodak said. To contact the reporter on this story: Bob Willis in Washington bwillis@bloomberg.net

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