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Economy in Brief

Empire State Factory Conditions Improve To Highest Level in Two Years
by Tom Moeller August 17, 2009

For August, the Federal Reserve Bank of New York reported that its Empire State Factory Index of General Business Conditions was positive and at its highest level in two years. The latest reading of 12.08 compares to sharply negative levels this past Winter and suggests positive growth in factory sector activity. The latest level was better than Consensus expectations for a reading of 3.0.

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.

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 new orders component paced the August index gain with a rise to the highest level in two years. The shipments index also improved to its highest since early-2008 while the employment index jumped m/m to its highest level since last October. In the history of the NY employment index, there has been an 87% correlation between the employment index and the three-month growth in overall U.S. factory sector employment as reported by the Labor Department. The workweek index also improved sharply as the unfilled orders, inventories and delivery times series rose modestly.

The price index firmed to its highest level since November. Nevertheless, the index level remained down sharply from last year. Since inception in 2001, there has been a 77% 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 rose during August to its highest level since early 2007. The subseries for new orders, shipments, employment and capital expenditures each ticked up.

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

Below the Line: Estimates of Negative Equity among Nonprime Mortgage Borrowers from the Federal Reserve Bank of New York can be found here.

Empire State Manufacturing Survey August July August '08  2008 2007 2006
General Business Conditions (diffusion index, %)   12.08 -0.55 -1.16 -10.10 17.23 20.24
   New Orders 13.43 5.89 -3.50 -6.25 15.71 20.11
   Employment -7.45 -20.83 -4.49 -5.36 11.28 12.62
Prices Paid 13.83 10.42 65.17 46.99 35.64 41.88
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