Manufacturing activity in the New York region improved this month after last month's dramatic drop into contractionary territory, according to the latest figures released by the New York Federal Reserve.

The regional central bank announced Tuesday that its Empire State manufacturing survey came in at 5.70 in February, after posting a -12.60 in January. The data was better than expectations, as consensus forecasts pointed to a smaller improvement of -1.0.

"Business activity increased slightly in New York State in February," the report notes. "New orders and shipments grew moderately. Lead times were slightly longer and supply availability was slightly lower. Inventories continued to expand modestly. Employment levels declined. Input prices increased at the fastest pace in nearly two years, and selling price increases also increased markedly. Although businesses expect conditions to improve over the next six months, optimism about the outlook declined significantly." 

Gold prices reached new session highs shortly after the 8:30 am EST release. Spot gold last traded at $2,918.83 an ounce, a gain of 0.70% on the session.

The components of the report showed a strengthening of conditions in most areas of the region's manufacturing sector.

"The new orders index rose twenty points to 11.4, suggesting that orders increased after declining last month, and the shipments index rose sixteen points to 14.2, indicating that shipments increased," the report noted. "Backlogs of orders remained stable. The inventory index remained positive at 8.7, a sign that inventories grew. The lead time index came in at 5.4, suggesting slightly longer lead times, and the supply availability index fell to -2.2, a sign that supply availability declined slightly."

"The number of employees index fell to -3.6, suggesting that employment levels declined somewhat, while the average workweek index was -1.2, suggesting that hours worked remained stable," they added.

However, both price indexes increased for the second consecutive month. "The prices paid index rose eleven points to 40.2, its highest level in nearly two years, and the prices received index rose ten points to 19.6," the report said.

And while businesses expect conditions to improve in the coming months, optimism declined significantly. "The index of future business activity fell fifteen points to 22.2," the report notes. "Capital spending plans remained weak. Supply availability is expected to contract somewhat over the next six months."

Ernesto Hoffman, Kitco