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Economy in Brief

U.S. Empire State Index Remained Negative
by Tom Moeller July 15, 2008

The Federal Reserve Bank of New York reported that its July index of manufacturing activity in the Empire State remained negative at -4.92 after the unrevised -8.68 during June. It was the fifth negative reading this year. A more negative reading of -8.0 for July 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.

Negative readings for inventories and unfilled orders weighed heavily on the July index. The new orders and shipments indexes, however, improved to their first positive readings since April.

The employment index turned to its most negative reading since 2003. 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 rose to the highest level in the series' history. The latest index level was 77.89. 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.

The Empire State index of expected business conditions in six months fell to its lowest level since the recession year of 1981.

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.

Empire State Manufacturing Survey July June July '07  2007 2006 2005
General Business Conditions (diffusion index, %)   -4.92 -8.68 25.73 17.23 20.24 15.53
Prices Paid 77.89 66.28 34.57 35.64 41.88 44.74
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