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Economy in Brief

Empire State Factory Index Turns Negative
by Tom Moeller   June 15, 2011

The Federal Reserve Bank of New York reported that its Empire State Factory Index of General Business Conditions fell to -7.79. The figure was the first negative reading since November of last year. The number ran counter to Consensus expectations for 13.5. These data 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 amongst the component series was widespread. Three of the series turned negative including new orders, shipments and delivery times (faster speeds). The employment series also weakened to its lowest since March. 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 also reversed the gains of the prior two months.

The Empire State index of expected business conditions in six months dropped sharply to its lowest level since March 2009. The separate series for capital spending fell moderately.

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 Jun May Apr Jun'10 2010 2009 2008
General Business Conditions (diffusion index, %) -7.79 11.88 21.70 17.71 13.80 -2.81 -9.96
  New Orders -3.61 17.19 22.34 17.55 9.93 -2.51 -6.23
  Shipments -8.02 25.75 28.29 15.62 11.66 2.80 0.36
  Unfilled Orders 0.00 9.68 2.56 -1.23 -6.58 -13.36 -8.72
  Delivery Time -3.06 2.15 -1.28 9.88 -2.87 -8.18 -3.63
  Inventories 1.02 10.75 -1.28 1.02 -1.48 -22.89 -7.87
  Employment 10.20 24.73 23.08 12.35 11.78 -17.28 -5.36
  Prices Paid 56.12 69.89 57.69 27.16 29.63 1.33 46.99
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