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Economy in Brief

Empire State Factory Index Is Less Negative
by Tom Moeller   July 15, 2011

The Federal Reserve Bank of New York reported that its Empire State Factory Index of General Business Conditions improved to -3.76. The figure again indicated negative growth in overall conditions but an easing of the rate decline. The number was weaker than Consensus expectations for improvement to 5.0. 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.

The component series were mixed last month. Three of the series were still negative including new orders, unfilled orders and inventories. Though it remained positive, the employment series was at its lowest since December. 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 fell to its lowest since January.

The Empire State index of expected business conditions in six months improved slightly m/m to 32.33 but remained down sharply from the January high. The separate series for capital spending fell to its lowest since March while technology spending fell as well.

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. The expectations figure is in Haver's AS1REPNA database.

Empire State Manufacturing Survey Jul Jun May Jul '10 2010 2009 2008
General Business Conditions (diffusion index, %) -3.76 -7.79 11.88 7.07 13.80 -2.81 -9.96
  New Orders -5.45 -3.61 17.19 9.29 9.93 -2.51 -6.23
  Shipments 2.22 -8.02 25.75 6.13 11.66 2.80 0.36
  Unfilled Orders -12.22 0.00 9.68 -15.87 -6.58 -13.36 -8.72
  Delivery Time 1.11 -3.06 2.15 -7.94 -2.87 -8.18 -3.63
  Inventories -5.56 1.02 10.75 6.35 -1.48 -22.89 -7.87
  Employment 1.11 10.20 24.73 7.94 11.78 -17.28 -5.36
  Prices Paid 43.33 56.12 25.40 27.16 29.63 1.33 46.99
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