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Economy in Brief

Empire State Business Conditions Show Improved Factory Sector
by Tom Moeller March 15, 2010

The factory sector improved again this month. The Federal Reserve Bank of New York reported that its March Empire State Factory Index of General Business Conditions held onto its sharp improvement from the series' low twelve months ago. Though down just slightly m/m, the index at 22.86 remained near the highest level since 2004. The latest level suggests positive growth in factory sector activity and it roughly matched Consensus expectations for a reading of 22.0.

The figure is a diffusion index. Since the series' inception in 2001, there has been a 74% correlation between its level and the three-month change in U.S. factory sector 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.

Amongst the separate survey questions, the new orders series led with an increase to nearly the highest level since early-2006. Most other series rose m/m, notably the inventory series which furthered the sharp February gain and landed near its highest in several years. The employment series also rose to 12.35, its highest since 2007. There has been an 87% correlation between the employment index and the three-month growth in factory sector employment as reported by the Labor Department.

The prices paid index slipped m/m to 29.63 but remained up sharply from the early-2009 low. Since inception 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 inched up m/m and was near the highest since early 2004. The capital expenditure and technology spending series both remained near the highest levels since the recession began.

Empire State Manufacturing Survey March February January March '09  2009 2008 2007
General Business Conditions (diffusion index, %)   22.86 24.91 15.92 -32.29 -2.76 -9.97 17.22
   New Orders 25.43 8.78 20.48 -43.35 -2.52 -6.22 15.70
   Inventories 4.94 0.00 -17.33 -8.05 -26.97 -7.87 -3.95
   Employment 12.35 5.56 4.00 -38,20 -17.28 -5.36 11.28
Prices Paid 29.63 31.94 32.00 -14.61 1.33 46.99 35.64
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