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Economy in Brief

Empire State Factory Sector Index Moves Up to 2009 High
by Tom Moeller  September 15, 2014

The Federal Reserve Bank of New York reported that its Empire State Factory Index of General Business Conditions jumped to 27.54 during September after moving lower in August to 14.69. It was the highest level since October 2009 and beat expectations for 16.0.0 in 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 improved slightly to 53.4 this month from 53.2, still near the lowest level since April. A rising level of activity is indicated by a figure above 50. Since inception in 2001, the business conditions index has had a 68% correlation with the quarterly change in real GDP.

Movement amongst the component series was mixed. The shipments figure increased to its highest level since 2009 while new orders improved modestly, also remaining near its five-year high. The inventories series bounced slightly higher following a sharp August decline. To the downside, the employment index fell to its lowest level in nine months. During the last ten years there has been a 75% correlation between the jobs index and the m/m change in factory sector payrolls. Also falling were the unfilled orders and average workweek indexes. The delivery times index was fairly stable after sharp declines in the prior two months.

The prices paid index pulled back modestly following sharp gains during the prior two months. Twenty seven 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 held steady at 46.72, its highest level since January 2012. The unfilled orders, employee workweek and prices paid series moved higher while new orders, shipments, and employment declined. Capital expenditures and technology spending also moved slightly 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 can be found in Haver's AS1REPNA database.

Empire State Manufacturing Survey Sept Aug Jul Sept'13 2013 2012 2011
General Business Conditions (ISM Adjusted) 53.4 53.2 55.5 52.4 50.0 51.8 51.8
General Business Conditions (Diffusion Index, %) 27.54 14.69 25.60 6.78 3.82 4.29 4.48
 New Orders 16.86 14.14 18.77 2.62 1.13 1.47 4.04
 Shipments 27.08 24.59 23.64 15.69 4.49 11.22 9.47
 Unfilled Orders -10.87 -7.95 -6.82 -6.45 -8.74 -8.83 -5.29
 Delivery Time -5.43 -5.68 -1.14 -4.30 -3.52 -0.30 -0.91
 Inventories -7.61 -14.77 -3.41 2.15 -5.73 -2.91 -1.80
 Number of Employees 3.26 13.64 17.05 7.53 3.73 8.62 6.68
 Prices Paid 23.91 27.27 25.00 21.51 21.53 24.71 40.66
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