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Economy in Brief

U.S. Empire State Index Remained Negative; Prices Paid Index Lower Still
by Tom Moeller December 15, 2008

The Empire State Index of manufacturing actor activity for December, reported by the Federal Reserve Bank of New York, remained as negative as it was during the prior month. At -25.73 the index was the lowest in the series' short eight year history. A reading of -27 had been the Consensus expectation.

The figure is a diffusion index. Since the series' inception in 2001 there has been a 58% correlation between its level and the three-month change in U.S. factory sector industrial production.

The index of pricing pressure also fell to an eight year low of -7.45, down over twenty five points from November. That was the lowest level since December 2001. Since 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 indexes for new orders, shipments and unfilled orders all remained about as negative as during November.

The employment index improved just slightly m/m but remained near its lowest level since late 2001, negative for the sixth consecutive month. In the 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.

The Empire State index of expected business conditions in six months improved slightly to 19.48 from 13.02. It was still close to its lowest since the recession of 2001. The subseries for shipments improved but employment and new orders remained low. The pricing index collapsed to the lowest level since 2001.

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 December November December '07  2008 2007 2006
General Business Conditions (diffusion index, %)   -25.76 -25.43 9.89 -10.13 17.23 20.24
Prices Paid -7.45 20.48 35.00 46.99 35.64 41.88
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