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Economy in Brief

U.S. Empire State Index Negative Again
by Tom Moeller June 16, 2008

The Federal Reserve Bank of New York reported that its June index of manufacturing activity, in the Empire State, fell further into negative territory. The decline to -8.68 followed an unrevised -3.23 during May and it was the fourth negative reading this year. A less negative reading of -1.8 for June had been the Consensus expectation.

The figure is a diffusion index. 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.

Most of the index's components were negative with the shipments index, at -6.54, at its lowest level since the recession of 2001. The new orders index, at -5.48, was at its lowest level since February.

The employment rose remained slightly positive at a low 1.16. In the (perhaps too) short seven year history of the NY employment index, there has been an 86% correlation between it 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.

Pricing pressure eased slightly m/m to a reading of 66.28 but that still was near its record high reached last month. The latest index level was 66.28. Since the series' inception in 2001 there has been an 81% correlation between the index of prices paid and the three-month change in the core intermediate materials PPI.

Core Inflation: A Review of Some Conceptual Tools from the Federal Reserve Bank of St. Louis is available here.

The Empire State index of expected business conditions in six months improved further following its May increase and was at the highest level since December.

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.

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

Big, Not Better? from the Centre for Policy Studies in London can be found here?

Empire State Manufacturing Survey June May June '07  2007 2006 2005
General Business Conditions (diffusion index, %)   -8.68 -3.23 23.48 17.23 20.24 15.53
Prices Paid 66.28 69.57 42.55 35.64 41.88 44.74
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