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Economy in Brief

Empire State Factory Index Increases Reflecting Broad-based Improvement
by Tom Moeller  July 15, 2013

The Federal Reserve Bank of New York indicated that its Empire State Factory Index of General Business Conditions rose to 9.46 this month from an unrevised 7.84 in June. The latest figure beat Consensus expectations for 5.0. Improvement in the component series was widespread. In addition, based on these figures, Haver Analytics calculates an index that is compatible to the ISM series. The adjusted figure rose to 51.3, its highest level since February. An improving level of activity is indicated by a figure above 50. Since inception in 2001, the business conditions index has had a 65% correlation with the quarterly change in real GDP.

Improvement in the overall index reflected broad-based component gains. The shipment series surged to 8.96 while new orders also rose sharply. The delivery times index jumped to its highest level since April of last year, thus indicating a slower rate of order filling. The employment figure recovered most of its June decline but remained well below last year's highs. During the last ten years there has been a 73% correlation between the jobs index and the m/m change in factory sector payrolls.

The prices paid reading backpedaled to its lowest level since December. A lessened 17 percent of respondents reported paying higher prices while a higher 8 percent paid less. During the last ten years there has been a 66% 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 rose to 32.01, its highest level since March. Improved shipments and new orders led the gain but employment fell to nearly its lowest since the economic expansion began.

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'12 2012 2011 2010
General Business Conditions (ISM Adjusted) 51.3 46.4 49.3 52.7 51.8 51.8 52.9
General Business Conditions (Diffusion Index, %) 9.46 7.84 -1.43 7.08 4.24 4.47 13.86
 New Orders 3.77 -6.69 -1.17 -2.27 1.38 4.04 9.96
 Shipments 8.96 -11.77 -0.02 11.52 11.13 9.51 11.75
 Unfilled Orders -8.70 -14.52 -6.82 -13.58 -8.83 -5.29 -6.58
 Delivery Time 3.26 -6.45 -3.41 -1.23 -0.30 -0.91 -2.87
 Inventories -6.52 -11.29 -7.95 0.00 -2.91 -1.80 -1.48
 Number of Employees 3.26 0.00 5.68 18.52 8.62 6.68 14.29
 Prices Paid 17.39 20.97 20.45 7.41 24.71 40.66 29.63
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