Business conditions for manufacturers in New York state improved in August albeit at a slower pace than expected, the New York Federal Reserve said in a report on Friday.

The New York Fed's "Empire State" general business conditions index fell to 14.69 from July's 25.60, which was the highest since April 2010.

Economists polled by Reuters had expected a reading of 20.0 this month. A reading above zero indicates expansion.

New orders fell to 14.14 from 18.77, while inventories continued to shrink, at -14.77 from -3.41.

The pace of growth in employment gauges was mixed, with the index for the number of employees down to 13.64 from 17.05 while the average employee workweek index rose to 7.95 from 2.27.

The index of business conditions six months ahead soared to 46.76 in August, the highest in 2-1/2 years, from 28.47 in July.

The survey of manufacturing plants in the state is one of the earliest monthly guideposts to U.S. factory conditions.