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Economy in Brief

Empire State Factory Sector Index Backpedals
by Tom Moeller  October 15, 2014

The Federal Reserve Bank of New York reported that its Empire State Factory Index of General Business Conditions declined to 6.17 during October, reversing all of this year's gains. It fell short of expectations for 20.9 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 fell sharply to 50.6 this month from 53.4 and was at the lowest level in six months. 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 series led the way down to the lowest point since June of last year. New orders also fell to the lowest level in six months. Delivery times remained negative for the third straight month, at the lowest level since April. Elsewhere, the component series improved. Unfilled orders and inventories were up moderately. The employment series made up most of the September decline but remained well below its May high. During the last ten years there has been a 71% correlation between the index level and the m/m change factory sector payrolls.

The prices paid index fell to the lowest level since July 2012. A sharply reduced 16 percent of respondents reported paying higher prices while a higher 5 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 fell to 41.66, its lowest level in three months. The new orders, shipments, employment, workweek and inventories series moved lower. Capital expenditures moved up to the highest level in six months while technology spending was at the highest point since early 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 can be found in Haver's AS1REPNA database.

Empire State Manufacturing Survey Oct Sept Aug Oct'13 2013 2012 2011
General Business Conditions (ISM Adjusted) 50.6 53.4 53.2 51.2 50.0 51.8 51.8
General Business Conditions (Diffusion Index, %) 6.17 27.54 14.69 3.24 3.82 4.29 4.48
 New Orders -1.73 16.86 14.14 6.60 1.13 1.47 4.04
 Shipments 1.12 27.08 24.59 12.98 4.49 11.22 9.47
 Unfilled Orders -4.55 -10.87 -7.95 -6.02 -8.74 -8.83 -5.29
 Delivery Time -5.68 -5.43 -5.68 -10.84 -3.52 -0.30 -0.91
 Inventories 2.27 -7.61 -14.77 0.00 -5.73 -2.91 -1.80
 Number of Employees 10.23 3.26 13.64 3.61 3.73 8.62 6.68
 Prices Paid 11.36 23.91 27.27 21.69 21.53 24.71 40.66
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