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Economy in Brief

Empire State Factory Index Increases Again
by Tom Moeller  February 15, 2011

The Federal Reserve Bank of New York reported that its Empire State Factory Index of General Business Conditions improved further to 15.43, the highest since June of last year. The figure roughly equaled Consensus expectations for 15.0. Nevertheless, the index remained below last year's high of 29.71. These figures are diffusion indexes which are calculated by subtracting the percent of respondents reporting the indicator lower from those reporting the indicator higher. Thus, they have a good correlation with growth in the series covered. Separately, since inception in 2001, the business conditions index has a 78% correlation with the quarterly change in real GDP.

Improvement in the subseries was notable for inventories, delivery times (shorter) and the average employee workweek The new orders series slipped while the employment reading also fell to 3.61 from 8.42. (During the last ten years there has been an 82% correlation between the jobs index and the m/m change in factory sector payrolls.) The prices paid index rose sharply to 45.78, its highest since August 2008. Since inception, there has been a 68% 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 fell to 49.40 and reversed its last three months' improvement. Deterioration was notable for new orders, shipments and unfilled orders. A separate series of expected capital spending slipped from its recent high while the technology index also slipped.

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 Feb Jan Dec Feb'10 2010 2009 2008
General Business Conditions (diffusion index, %) 15.43 11.92 9.89 24.86 13.80 -2.81 -9.96
 New Orders 11.80 12.39 2.03 13.42 9.93 -2.51 -6.23
 Inventories 9.64 4.21 -15.91 -18.42 0.00 -22.89 -7.87
 Employment 3.61 8.42 -3.41 5.56 11.78 -17.28 -5.36
 Prices Paid 45.78 35.79 28.41 31.94 29.63 1.33 46.99
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