Business conditions for manufacturers in New York were weaker than expected, although the New York Fed’s index remains in positive territory.

The New York Fed said on Monday that it’s Empire State index of general business conditions weakened to 2.0, down from last month’s already low reading of 4.9. Economists had expected it to hold steady.

The outlook for six-months ahead slumped, indicating a decline in optimism among the manufacturers surveyed. Capital expenditures declined to the lowest level in three years.

One positive sign was a rise in employment in manufacturing, the first after three months of negative readings.

Weakness in manufacturing is one of the key reasons the Federal Reserve is considering cutting interest rates this week.  Monday’s Empire State index certainly does not give them reason to hesitate.