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Economy in Brief

Empire State Factory Index Improves But Pricing Collapses
by Tom Moeller  July 16, 2012

The Empire State Factory Index of General Business Conditions for July rose to 7.39 and recovered a piece of its June decline. Consensus expectations had been for rough stability at 3.5. Based on these figures, Haver Analytics calculates an index that is compatible to the ISM series. The adjusted figure also improved slightly to 52.5 but was still near its lowest since November. Since inception in 2001, the business conditions index has a 64% correlation with the quarterly change in real GDP.

Higher readings for shipments, inventories and employment provided the lift to this month's overall index. During the last ten years there has been a 76% correlation by the jobs index and the m/m change in factory sector payrolls. Elsewhere, new orders fell to its first negative reading since November and unfilled orders were off sharply to the lowest level this year. 

The reading for prices paid of 7.41 was its lowest since June 2009. During the last ten years there has been a 62% correlation between the index and the 3-month change in the intermediate goods PPI. 

Looking ahead, the Empire State index of expected business conditions in six months again fell sharply to its lowest since October. The decline was led by lower readings for the employee workweek, employment, new orders & delivery times.

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. The data is available in Haver's SURVEYS database. The ISM-adjusted headline index is calculated by Haver Analytics. The series date back only to 2001. The Consensus expectation figure is in Haver's AS1REPNA database.

Empire State Manufacturing Survey Jul Jun May Jul '11 2011 2010 2009
General Business Conditions (ISM Adjusted) 52.5 51.1 55.8 49.5 51.7 52.9 45.2
General Business Conditions (Diffusion Index, %) 7.39 2.29 17.09 -2.96 4.33 13.85 -2.78
 New Orders -2.69 2.18 8.32 -4.24 3.99 9.93 -2.51
 Shipments 10.28 4.81 24.14 2.41 9.39 11.61 2.81
 Unfilled Orders -13.58 -5.15 -4.82 -12.22 -5.29 -6.58 -13.36
 Delivery Time -1.23 0.00 0.00 1.11 -0.91 -2.87 -8.18
 Inventories 0.00 -8.25 4.82 -5.56 -1.80 -1.48 -22.89
 Number of Employees 18.52 12.37 20.48 1.11 6.68 14.29 -17.28
 Prices Paid 7.41 19.59 37.35 43.33 40.66 29.63 1.33
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