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Economy in Brief

Empire State Factory Conditions Improve To Highest Level Since 2004
by Tom Moeller October 15, 2009

The Federal Reserve Bank of New York reported that its October Empire State Factory Index of General Business Conditions improved to its highest level since 2004. The latest reading of 34.57 compares to sharply negative levels this past Winter and suggests positive growth in factory sector activity. The latest level was much better than Consensus expectations for a reading of 18.0.

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 again paced the latest gain in the overall October index with a rise to the highest level since 2005. The shipments index also improved sharply while the employment index reached its highest level since 2007. 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 did unfilled orders and delivery times.

The price index eased slightly after having risen to its highest level in a year during September. Nevertheless, the index level remained down sharply from all of 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.

Empire State Manufacturing Survey October September October '08  2008 2007 2006
General Business Conditions (diffusion index, %)   34.57 18.88 -24.30 -10.10 17.23 20.24
   New Orders 30.82 19.84 -19.57 -6.25 15.71 20.11
   Employment 10.39 -8.33 -3.66 -5.36 11.28 12.62
Prices Paid 19.48 20.24 31.71 46.99 35.64 41.88
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