By Amina Niasse

Manufacturing activity in New York State accelerated moderately in September, topping expectations for a continued slowdown as new orders and shipments increased.

The New York Fed's monthly gauge of factory activity in the state rose to 1.9 this month from negative 19.0 in August. Readings above zero indicate expanding activity.

Economists polled by Reuters had expected another month of contracting activity with a median forecast of negative 10.

An index tracking businesses’ future outlook rose to 26.3, the highest in more than a year, from 19.9 last month. Elevated business optimism was accompanied by brighter expectations for orders and shipments.

The rise in New York manufacturers' optimism contrasts with a recent survey of small businesses released Tuesday by the National Federation of Independent Business, which showed a decline in business optimism associated with difficulties in hiring skilled workers and worries over inflation.

Another index showed New York State's manufacturing sector experienced a contraction in labor, falling to -2.7 basis points from -1.4 basis points in August. The continued drop in labor is a departure from July's first positive figure since January.

Manufacturers paid slightly more for inputs last month with the prices paid index rising by 0.6 basis points. Despite the modest increase, the measure remains below figures seen in 2022 and the first quarter of 2023, pointing toward a steady cooling of inflation.

The index's six-month outlook on capital spending weakened, in line with expectations of slower growth and falling to 10.3 basis points from 13.6 points the period prior. Capital expenditures were widely projected to contract in 2023 following heavy investment during the COVID-19 pandemic.

(Reporting by Amina Niasse; Editing by Chizu Nomiyama)