The NY Empire State manufacturing index extended its rebound at the start of the new year. The headline index rose in January from a downwardly revised 8.19 to 13.48, while the consensus was looking for a more moderate increase (to 11.0). Strength is confirmed by the details as new orders (13.70 from 5.99), inventories (6.59 from -3.49), unfilled orders (-5.49 from -15.12), number of employees (12.09 from 2.33) and average workweek (6.59 from -2.33) rose significantly, while shipments posted a more moderate increase (from 20.06 to 21.69). Only delivery time weakened in December, falling from 0.00 to -3.30. Prices received jumped sharply from 3.49 to 23.09 and the prices paid index picked further up, from 24.42 to 26.37. The forward looking index rose too, from 45.61 to 54.87. It is an encouraging sign that business sentiment in the manufacturing sector remains strong at the start of the new year. After the significant rebound in the NY Fed index in the last quarter of 2011, we had expected to see a temporary pause. It will be interesting to see whether this continued strength will be confirmed by other regional business confidence indicators and by the national ISM’s.