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Economy in Brief

Empire State Factory Index Returns To Negative Territory
by Tom Moeller  May 15, 2013

Industrial sector activity continues to lose forward momentum. The Federal Reserve Bank of New York reported that the Empire State Factory Index of General Business Conditions declined to -1.43 this month from an unrevised 3.05 in April. It was the first negative reading since January. Any number above 50 indicates positive growth in factory sector activity. The latest fell short of Consensus expectations for 3.6. Based on these figures, Haver Analytics calculates an index that is compatible to the ISM series. The adjusted figure fell to 49.3 indicating slightly negative growth. Since inception in 2001, the business conditions index has had a 65% correlation with the quarterly change in real GDP.

Weakness in the overall index reflected broad-based component declines. A shortened workweek was the weakest series. The new orders, unfilled orders and inventory number fell sharply as well. Also down slightly was the employment figure. During the last ten years there has been a 76% correlation between the jobs index and the m/m change in factory sector payrolls.

The prices paid reading reversed its earlier increase and fell to the lowest level since December. A lessened twenty eight percent of respondents reported paying higher prices while eight percent paid less, the most since July. During the last ten years there has been a 64% 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 fell to 25.48, the lowest level since January. Lower readings for shipments, the number of employees, new orders, unfilled orders and prices paid showed large declines.

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 May Apr Mar May'12 2012 2011 2010
General Business Conditions (ISM Adjusted) 49.3 50.2 51.2 55.7 51.8 51.8 52.9
General Business Conditions (Diffusion Index, %) -1.43 3.05 9.24 14.52 4.24 4.47 13.86
 New Orders -1.17 2.20 8.18 8.99 1.38 4.04 9.96
 Shipments -0.02 0.75 7.76 23.11 11.13 9.51 11.75
 Unfilled Orders -6.82 -3.41 -2.15 -4.82 -8.83 -5.29 -6.58
 Delivery Time -3.41 -3.41 -2.15 0.00 -0.30 -0.91 -2.87
 Inventories -7.95 -4.55 -5.38 4.82 -2.91 -1.80 -1.48
 Number of Employees 5.68 6.82 3.23 20.48 8.62 6.68 14.29
 Prices Paid 20.45 28.41 25.81 37.35 24.71 40.66 29.63
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