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Economy in Brief

Empire State Factory Sector Index Improves to Four-Year High
by Tom Moeller  May 16, 2014

The Federal Reserve Bank of New York indicated that its Empire State Factory Index of General Business Conditions for May jumped to 19.01 from 1.29 during April. The latest was the highest level since May 2011 and beat expectations for 5.3, 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 also jumped this month to 55.0 from 49.6, the highest level in two years. A rising level of activity is indicated by a figure above 50. Since inception in 2001, the business conditions index has had a 67% correlation with the quarterly change in real GDP.

Improvement in the overall May index was widespread: new orders, shipments, unfilled orders, delivery times and inventories each rose. The employment index reached its highest level in three years. During the last ten years there has been a 75% correlation between the jobs index and the m/m change in factory sector payrolls.

The prices paid index fell to its lowest level since December. Twenty three percent of respondents reported paying higher prices while three percent paid less. During the last ten years, there has been a 70% 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 improved sharply to 43.96, the highest level since early 2012. The index of prices paid in twelve months fell, however,  to its lowest level since July of last year.

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'13 2013 2012 2011
General Business Conditions (ISM Adjusted) 55.0 49.6 51.7 49.3 50.0 51.8 51.8
General Business Conditions (Diffusion Index, %) 19.01 1.29 5.61 0.27 3.82 4.29 4.48
 New Orders 10.44 -2.77 3.13 -0.67 1.13 1.47 4.04
 Shipments 17.44 3.15 3.97 -0.36 4.49 11.22 9.47
 Unfilled Orders -1.10 -13.27 -16.47 -6.82 -8.74 -8.83 -5.29
 Delivery Time -1.10 -9.18 -3.53 -3.41 -3.52 -0.30 -0.91
 Inventories 2.20 -3.06 7.06 -7.95 -5.73 -2.91 -1.80
 Number of Employees 20.88 8.16 5.88 5.68 3.73 8.62 6.68
 Prices Paid 19.78 22.45 21.18 20.45 21.53 24.71 40.66
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