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Economy in Brief

Empire State Factory Index Improves Sharply
By Tom Moeller  December 15, 2011

The Federal Reserve Bank of New York reported that its Empire State Factory Index of General Business Conditions rose to 9.53 in December. It was the highest level since May and was better than Consensus expectations for 3.0. For all of this year the index was down just slightly from 2010. 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 rose to 52.5, also its highest level since May. Since inception in 2001, the business conditions index has a 64% correlation with the quarterly change in real GDP.

The component series showed widespread improvement led this month by improved figures for shipments, new 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 also reversed its November deterioration. During the last ten years there has been a 63% correlation between the index and the 3-month change in the intermediate goods PPI.

The Empire State index of expected business conditions in six months jumped to its highest level since May. Performance amongst the subseries was uniformly strong, except capital spending which reversed its November jump into positive territory.

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 Dec Nov Oct Dec'10 2011 2010 2009
General Business Conditions (ISM Adjusted) 52.5 49.2 49.9 48.3 51.7 52.9 45.2
General Business Conditions (Diffusion Index, %) 9.53 0.61 -8.48 9.89 4.33 13.80 -2.81
 New Orders 5.10 -2.07 0.16 2.03 3.99 9.93 -2.51
 Shipments 20.87 9.43 5.33 7.16 9.36 11.66 2.80
 Unfilled Orders -15.12 -7.32 -4.49 -18.18 -5.29 -6.58 -13.36
 Delivery Time 0.00 0.00 -1.12 -6.82 -0.91 -2.87 -8.18
 Inventories -3.49 -12.20 -8.99 -15.91 -1.80 -1.48 -22.89
 Employment 2.33 -3.66 3.37 -3.41 6.68 14.29 -17.28
 Prices Paid 24.42 18.29 22.47 28.41 40.66 29.63 1.33
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