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Economy in Brief

Empire State Factory Index Is Disappointing
by Tom Moeller  December 16, 2013

The Federal Reserve Bank of New York reported that its Empire State Factory Index of General Business Conditions for December ticked up to 0.98 from an unrevised November reading of -2.21. The gain disappointed expectations for a level of 4.0, according to the Action Economics Forecast Survey. The full year reading also was disappointing as it slipped to 3.77 from 4.24 in 2012.

Based on these figures, Haver Analytics calculates a seasonally adjusted index that is compatible to the ISM series. The adjusted figure fell to 47.3, the second number below 50 since June and the lowest reading in six months. An improving level of activity is indicated by a figure above 50. Since inception in 2001, the business conditions index has a 63% correlation with the quarterly change in real GDP.

The slight December improvement in the overall index reflected gains in the shipments and new orders series. The employment reading remained at 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. To the downside were the inventories, unfilled orders and delivery times components.

Also deteriorating was the prices paid index to its lowest level since November 2012. A reduced 17 percent of respondents reported paying higher prices while 1 percent paid less. During the last ten years, there has been a 67% 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 35.72, its lowest level since July. Lower readings for new orders, shipments, employment, inventories, capital and technology expenditures dragged the total lower.

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 Dec Nov Oct Dec'12 2013 2012 2011
General Business Conditions (ISM Adjusted) 47.3 48.9 51.4 48.5 50.0 51.8 51.8
General Business Conditions (Diffusion Index, %) 0.98 -2.21 1.52 -7.30 3.77 4.24 4.47
 New Orders -3.54 -5.53 7.75 -3.44 1.14 1.38 4.04
 Shipments 7.66 -0.53 13.12 11.93 4.49 11.13 9.51
 Unfilled Orders -24.10 -17.11 -6.02 -6.45 -8.74 -8.83 -5.29
 Delivery Time -9.64 -3.95 -10.84 -7.12 -3.52 -0.30 -0.91
 Inventories -21.69 -1.32 0.00 -11.83 -5.73 -2.91 -1.80
 Number of Employees 0.00 0.00 3.61 -9.68 3.73 8.62 6.68
 Prices Paid 15.66 17.11 21.69 16.13 21.53 24.71 40.66
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