By Kathleen Madigan

New York manufacturing conditions softened this month after a big run-up in July, according to data released Friday by the Federal Reserve Bank of New York. Area manufacturers report rising costs and selling prices.

The Empire State's business conditions index dropped to 14.69 in August after it rose to a four-year high of 25.60 in July.

A reading above zero indicates expansion.

Economists surveyed by The Wall Street Journal had expected the latest index to slow, but only to 20.

The New York Fed subindexes were mixed this month.

The new orders index fell to 14.14 in August from 18.77 last month. But the shipments index edged up to a multiyear high of 24.59 from 23.64.

The employment index declined to 13.64 from 17.05 in July. The workweek index, however, jumped to 7.95 from 2.27 in July.

Both price measures increased again this month, signs that inflation is creeping higher in New York state. The prices-received index rose to 7.95 from 6.82 in July and 4.30 in June. The prices-paid index edged up to 27.27 after it jumped to 25.00 last month from 17.20 in June.

"Despite the pullback in most of the survey's indexes for current conditions, optimism about the near-term outlook grew increasingly widespread," the report said.

The general business conditions expectations index for the next six months jumped to 46.76 from 28.47 last month. It was the highest reading in two and a half years, the report said.

New orders expectations almost doubled to 50.44 from 25.57. The employee expectations index increased to 22.73 from 17.05.

Expectations for capital spending doubled to 18.18 from 9.09 in July.

The New York Fed survey is the first monthly factoryreport released by regional Fed banks. Economists use the Fed surveys as guideposts to forecast the health of the national industrial sector as captured in the monthly manufacturing report done by the Institute for Supply Management.

Write to Kathleen Madigan at kathleen.madigan@wsj.com

(END) Dow Jones Newswires

August 15, 2014 08:45 ET (12:45 GMT)

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