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Economy in Brief

Empire State Factory Index Reverses Course
by Tom Moeller   May 16, 2011

The Federal Reserve Bank of New York reported that its Empire State Factory Index of General Business Conditions fell to 11.88 and reversed all of the gains this year. The figure ran counter to Consensus expectations for a higher reading of 20.0. These numbers are diffusion indexes which are calculated by subtracting the percent of respondents reporting poorer business conditions from those reporting improvement. Thus, they have a good correlation with growth in the series covered. Since inception in 2001, the business conditions index has a 77% correlation with the quarterly change in real GDP.

Deterioration was apparent only in the new orders and shipments subseries, which fell just moderately. Each of the other series rose. Notably, the employment series rose to its highest level of the cycle. During the last ten years there has been an 82% correlation between the index and the m/m change in the BLS measure of factory sector employment. The index of prices paid rose to its highest level since July 2008.

The Empire State index of expected business conditions in six months rose to 52.69 and made up most of the declines during the prior three months. A separate series for capital spending rose its second highest level since January and the technology spending index rose to its highest level since 2003.

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.

Promoting Research and Development: The Government's Role is the title of today's speech by Fed Chairman Ben S. Bernanke and it can be found here.

Empire State Manufacturing Survey May Apr Mar May'10 2010 2009 2008
General Business Conditions (diffusion index, %) 11.88 21.70 17.50 19.81 13.80 -2.81 -9.96
  New Orders 17.19 22.34 5.81 14.97 9.93 -2.51 -6.23
  Shipments 25.75 28.29 1.62 12.22 11.66 2.80 0.36
  Unfilled Orders 9.68 2.56 2.60 -7.89 -6.58 -13.36 -8.72
  Delivery Time 2.15 -1.28 -1.30 -6.58 -2.87 -8.18 -3.63
  Inventories 10.75 -1.28 3.90 1.32 -1.48 -22.89 -7.87
  Employment 24.73 23.08 9.09 22.37 11.78 -17.28 -5.36
  Prices Paid 69.89 57.69 53.25 44.74 29.63 1.33 46.99
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