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Economy in Brief

Empire State Factory Index Weakens Further
by Tom Moeller  November 15, 2013

The Federal Reserve Bank of New York reported that its Empire State Factory Index of General Business Conditions for November fell to -2.21 from an unrevised 1.52 in October. It was the first negative reading since May and disappointed expectations for a reading of 5.0, according to the Action Economics Forecast Survey. Based on these figures, Haver Analytics calculates a seasonally adjusted index that is compatible to the ISM series. The adjusted figure fell to 48.9, the first number below 50 since June. An improving level of activity is indicated by a figure above 50. Since inception in 2001, the business conditions index has had a 61% correlation with the quarterly change in real GDP.

Deterioration in the overall index reflected negative readings in most of the component series. The new orders & shipments numbers showed the greatest m/m deterioration followed by the average workweek and unfilled orders. The employment reading turned to zero, its lowest level since June. 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 index also fell to its lowest reading since December. A reduced 19 percent of respondents reported paying higher prices while 3 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 fell to 37.51, its lowest level since August. Lower readings for prices paid, the employee workweek and capital expenditures were offset by improved employment, shipments and new orders.

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 Nov Oct Sep Nov'12 2012 2011 2010
General Business Conditions (ISM Adjusted) 48.9 51.4 52.4 48.9 51.8 51.8 52.9
General Business Conditions (Diffusion Index, %) -2.21 1.52 6.29 -4.31 4.24 4.47 13.86
 New Orders -5.53 7.75 2.35 2.93 1.38 4.04 9.96
 Shipments -0.53 13.12 16.43 14.18 11.13 9.51 11.75
 Unfilled Orders -17.11 -6.02 -6.45 -11.24 -8.83 -5.29 -6.58
 Delivery Time -3.95 -10.84 -4.30 -7.12 -0.30 -0.91 -2.87
 Inventories -1.32 0.00 2.15 -12.36 -2.91 -1.80 -1.48
 Number of Employees 0.00 3.61 7.53 -14.61 8.62 6.68 14.29
 Prices Paid 17.11 21.69 21.51 14.61 24.71 40.66 29.63
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