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Economy in Brief

U.S. Empire State Index Off Modestly, Expectations Plummet
by Tom Moeller November 19, 2007

The index of manufacturing activity in New York State for November fell modestly to 27.37 from 28.75 last month which was its highest level in three years. The figures are reported by the Federal Reserve Bank of New York.

Since the series' inception in 2001 there has been a 55% correlation between the index level and the three month change in U.S. factory sector industrial production.

All of the overall indexes component fell at least slightly, including new orders and employment, but shipment improves slightly.

In the (perhaps too) short six year history of the NY employment index, there has been an 85% correlation between it level and the three month growth in overall factory sector employment.

Like the Philadelphia Fed Index of General Business Conditions, the Empire State Business Conditions Index reflects answers to an independent survey question; it is not a weighted combination of the components. Last week, the Federal Reserve Bank of Philadelphia reported slight improvement in its November General Business Conditions index of activity in the factory sector.

Pricing pressure again improved, for November to nearly its highest level since the Summer of last year. Since 2001 there has been an 81% correlation between the index of prices paid and the three month change in the core intermediate materials PPI.

The Empire State index of expected business conditions in six months plummeted and fell to its lowest level since the recession of 2001. Expectations for new orders and shipments fell most precipitously, but expectations for employment, capital spending and technology spending also fell sharply.

The Empire State Manufacturing Survey is a monthly survey of manufacturers in New York State conducted by the Federal Reserve Bank of New York. Participants from across the state in a variety of industries respond to a questionnaire and report the change in a variety of indicators from the previous month. Respondents also state the likely direction of these same indicators six months ahead. April 2002 is the first report, although survey data date back to July 2001.

For more on the Empire State Manufacturing Survey, including methodologies and the latest report, click here.

Monetary Policy under Uncertainty is today's speech by Federal Reserve Board Chairman Ben S. Bernanke and it is available here.

Empire State Manufacturing Survey November October Nov. '06  2006 2005 2004
General Business Conditions (diffusion index)   27.37 28.75  25.00 20.33 15.62 28.70
Prices Paid 42.86 36.05 34.90 41.88 44.74 50.50
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