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Economy in Brief

Empire State Factory Index Touches A New Low
by Tom Moeller  September 16, 2011

Unlike the modest uptick in the Philadelphia Fed's index, the Federal Reserve Bank of New York reported yesterday that its Empire State Factory Index of General Business Conditions fell to -8.82 in September. The number was weaker than Consensus expectations for -2.3. Based on these figures, Haver Analytics calculates an index that is compatible to the ISM series. The adjusted figure fell to 46.1, the lowest level since July, 2009. The Empire State figures 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 65% correlation with the quarterly change in real GDP.

The component series were mostly negative last month. Shipments and inventories fell hard. The employment series also fell sharply to the lowest level since September 2009. During the last ten years there has been an 81% correlation between the index and the m/m change in the BLS measure of factory sector employment. Conversely, the indexes of unfilled orders and prices paid improved slightly.

The Empire State index of expected business conditions in six months improved slightly m/m to 13.04 following its August collapse. It remained at nearly the lowest level since February of 2009. Performance amongst the subseries was mixed though employment fell to the lowest level since April 2009, before the end of the recession. Capital spending and technology spending both rose modestly following sharp August declines.

The Empire State data is available in Haver's SURVEYS database. The Empire State Business Conditions Index reflects answers to independent survey questions; it is not a weighted combination of the components. The ISM-adjusted headline index is calculated by Haver Analytics using the underlying response data from each survey to construct an overall index using the ISM methodology. This provides for better comparability across regions with the national ISM index. The series date back only to 2001. The Consensus expectation figure is in Haver's AS1REPNA database.

Empire State Manufacturing Survey Sep Aug Jul Sep'10 2010 2009 2008
General Business Conditions (ISM Adjusted) 46.1 49.1 49.3 50.9 52.9 45.2 47.7
General Business Conditions (diffusion index, %) -8.82 -7.72 -3.76 4.90 13.80 -2.81 -9.96
 New Orders -8.00 -7.82 -5.45 3.87 9.93 -2.51 -6.23
 Shipments -12.88 3.01 2.22 1.07 11.66 2.80 0.36
 Unfilled Orders -7.61 -15.22 -12.22 -5.97 -6.58 -13.36 -8.72
 Delivery Time -1.09 0.00 1.11 -11.94 -2.87 -8.18 -3.63
 Inventories -11.96 -7.61 -5.56 1.49 -1.48 -22.89 -7.87
 Employment -5.43 3.26 1.11 14.93 14.29 -17.28 -5.36
 Prices Paid 32.61 28.26 43.33 22.39 29.63 1.33 46.99
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