The New York Fed said its general business conditions index plunged to a negative 3.9 in December from a positive 18.7 in November, with a negative reading indicating contraction. Economists had expected the index to fall to a positive 10.6.

The steep drop by general business conditions index came a month after it surged to its highest level in a year.

A downturn by shipments contributed to the sharp pullback by the headline index, as the shipments index plummeted to a negative 5.7 in December from a positive 16.8 in November.

The new orders index also tumbled to 0.0 in December from a positive 15.9 in November, suggesting new orders held steady.

Meanwhile, the report said the number of employees index crept up to 7.3 in December from 6.6 in November, indicating a slight acceleration in the pace of job growth.

The New York Fed also said firms have become more optimistic conditions will improve over the next six months, with the future general business conditions index jumping to 35.7 in December from 19.1 in November.

On the inflation front, the prices paid index slumped to 37.6 in December from 49.0 in November, while the prices received index fell to 19.8 in December from 24.0 in November.

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