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Economy in Brief

Empire State Factory Index Improved
by Tom Moeller  March 15, 2011

The Federal Reserve Bank of New York reported that its Empire State Factory Index of General Business Conditions improved further to 17.50 during March, the highest since June of last year. The figure beat Consensus expectations for 16.0. 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. Since inception in 2001, the business conditions index has a 78% correlation with the quarterly change in real GDP.

Improvement was mostly confined to the employment and pricing subseries. The number of employees rose to its highest since October, and the average workweek strengthened. (During the last ten years there has been an 82% correlation between the jobs index and the m/m change in factory sector payrolls.) Unfilled orders also rose slightly. The prices paid index jumped to 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. Elsewhere, deterioration was widespread amongst new orders, shipments, delivery times and inventories.

The Empire State index of expected business conditions in six months held steady at 49.35. A separate series for capital spending fell to its lowest since August while the technology index also fell to its lowest since July.

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 Mar Feb Jan Mar'10 2010 2009 2008
General Business Conditions (diffusion index, %) 17.50 15.43 11.92 24.95 13.80 -2.81 -9.96
 New Orders 5.81 11.80 12.39 24.17 9.93 -2.51 -6.23
 Inventories 3.90 9.64 4.21 4.94 0.00 -22.89 -7.87
 Employment 9.09 3.61 8.42 12.35 11.78 -17.28 -5.36
 Prices Paid 53.25 45.78 35.79 29.63 29.63 1.33 46.99
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