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Economy in Brief

Empire State Factory Conditions Improved To Best In Over One Year
by Tom Moeller July 16, 2009

The Federal Reserve Bank of New York reported yesterday that its Empire State Factory Index of General Business Conditions improved to its highest level since April of last year. The latest reading of -0.55 compares to sharply negative levels this past Winter and, thus, suggests that recessionary forces have moderated. The index reached -38.23 this past March and the latest level was better than Consensus expectations for a reading of -5.0.

The Empire State Manufacturing Survey is a monthly survey of manufacturers in New York State. Participants from across the state in a variety of industries respond to a questionnaire and report the change in 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.

The figure is a diffusion index. Since the series' inception in 2001, there has been a 75% correlation between its level and the three-month change in U.S. factory sector industrial production. Like the Philadelphia Fed Index of General Business Conditions, the Empire State Business Conditions Index reflects answers to independent survey questions; it is not a weighted combination of the components. The series dates back only to 2001.

Improvement in the new orders component paced last month's index with a gain to the highest level since December of 2007. The shipments index also improved to its highest since the middle of last year while the average workweek expanded moderately. The employment index also improved slightly to the highest level since last October. In the history of the NY employment index, there has been an 87% correlation between it and the three-month growth in overall U.S. factory sector employment as reported by the Labor Department.

To the downside was a sharp decline in the inventories index, to a series' low, unfilled orders and delivery times.

Prices firmed as indicated by the first positive index reading since November. Nevertheless, the index level remained down sharply from last year. Since inception in 2001, there has been a 76% 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 slipped during July from its highest level since mid-2007. The subseries for new orders, shipments, employment and capital expenditures each fell but still remained improved from the winter lows..

The Empire State data is available in Haver's SURVEYS database.

Empire State Manufacturing Survey July June July '08  2008 2007 2006
General Business Conditions (diffusion index, %)   -0.55 -9.41 -6.16 -10.10 17.23 20.24
   New Orders 5.89 -8.15 4.52 -6.25 15.71 20.11
   Employment -20.83 -21.84 -6.32 -5.36 11.28 12.62
Prices Paid 10.42 -5.75 77.89 46.99 35.64 41.88
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