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Economy in Brief

Empire State Factory Index Recovers Despite Negative Employment
by Tom Moeller   December 15, 2010

The Federal Reserve Bank of New York reported that its December Empire State Factory Index of General Business Conditions recovered to 10.57 after its November decline to -11.14. The figure surpassed Consensus expectations for 5.0, but the index remained well below this year's high of 31.86. With a reading of 13.81 for the whole year, General Business Conditions improved to the highest since 2007.(These figures are diffusion indexes which are calculated by subtracting the percent of respondents reporting the indicator lower from previous month from those reporting the indicator higher. Thus, they have a good correlation with growth in the series covered.)

Sharp improvement in the new orders component to 2.60 led the monthly increase as shipments rose to a lesser extent. Working the other way the employment reading deteriorated sharply to -3.41, the first negative level of the year. (During the last ten years there has been an 81% correlation between the jobs index and the m/m change in factory sector payrolls.)

The prices paid index rose moderately to 28.41 though it remained down from its May high of 44.74. Since inception there has been a 69% correlation between the index of prices paid and the monthly change in the core intermediate materials PPI.

The Empire State index of expected business conditions in six months slipped to 48.86 from the November high of 54.55. Nevertheless, the level remained near its highest since April due to improvement in orders, shipments, unfilled orders and employment. A separate series on expected technology spending rose to its highest since May.

The Empire State data is available in Haver's SURVEYS database. The figures are diffusion indexes. 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.

Empire State Manufacturing Survey Dec Nov Oct Dec'09 2010 2009 2008
General Business Conditions (diffusion index, %) 10.57 -11.14 15.73 4.50 13.81 -2.76 -9.97
 New Orders 2.60 -24.38 12.90 2.77 9.91 -2.52 -6.22
 Inventories -15.91 0.00 -11.67 -18.42 -1.48 -22.89 -7.87
 Employment -3.41 9.09 21.67 -5.26 11.78 -17.28 -5.36
 Prices Paid 28.41 22.08 30.00 19.74 29.63 1.33 46.99
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