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Economy in Brief

Empire State Factory Index Improves Slightly
By Tom Moeller  November 15, 2011

The Federal Reserve Bank of New York reported that its Empire State Factory Index of General Business Conditions rose to 0.61 in November. It was the first positive reading in six months and was slightly better than Consensus expectations for -2.0. 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. Based on these figures, Haver Analytics calculates an index that is compatible to the ISM series. The adjusted figure slipped to 49.2 but remained up slightly from Q3. Since inception in 2001, the business conditions index has a 64% correlation with the quarterly change in real GDP.

The component series showed widespread deterioration led last month by lower figures for new orders, unfilled orders, inventories and employment. During the last ten years there has been an 77% correlation between the employment index and the m/m change in the BLS measure of factory sector employment. The prices paid index fell to its lowest in two years. During the last ten years there has been a 63% correlation between the index and the 3-month change in the intermediate goods PPI. Moving the other way, shipments and delivery times improved.

The Empire State index of expected business conditions in six months surged to its highest level since in six months. Performance amongst the subseries was uniformly strong, except prices which fell to the lowest level since September of last year. Capital spending and technology spending both jumped and recovered prior weakness.

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 Nov Oct Sep Nov'10 2010 2009 2008
General Business Conditions (ISM Adjusted) 49.2 49.9 46.1 47.1 52.9 45.2 47.7
General Business Conditions (diffusion index, %) 0.61 -8.48 -8.82 -10.44 13.80 -2.81 -9.96
 New Orders -2.07 0.16 -8.00 -23.80 9.93 -2.51 -6.23
 Shipments 9.43 5.33 -12.88 -5.27 11.66 2.80 0.36
 Unfilled Orders -7.32 -4.49 -7.61 -24.68 -6.58 -13.36 -8.72
 Delivery Time 0.00 -1.12 -1.09 -9.09 -2.87 -8.18 -3.63
 Inventories -12.20 -8.99 -11.96 0.00 -1.48 -22.89 -7.87
 Employment -3.66 3.37 -5.43 9.09 14.29 -17.28 -5.36
 Prices Paid 18.29 22.47 32.61 22.08 29.63 1.33 46.99
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