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Economy in Brief

Empire State Factory Sector Index Rebounds Into Positive Territory
by Tom Moeller  January 15, 2015

The Federal Reserve Bank of New York reported that its Empire State Factory Index of General Business Conditions rebounded to 9.95 during January, after falling to -1.23 in December, revised from -3.58. These figures, nevertheless, remained well below the 27.41 peak reached last September. The figure exceeded5.0 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 to 51.7 from 48.5, also indicating an expansion of business activity. 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.

Each of the component series improved this month. The employment reading rose and remained positive at 13.68, the highest level in six months. During the last ten years there has been a 71% correlation between the index level and the m/m change in factory sector payrolls. The unfilled orders and delivery times series exhibited the greatest improvement followed by shipments and new orders.

The prices paid index increased 12.63, suggesting the strongest pricing power since September. Twenty percent of respondents reported paying higher prices, the most since July. A reduced seven percent realized lower prices, down from 9% in December. 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 rebounded to 48.35, the highest level in three years. Rebounds in new orders, shipments & employment offset deterioration elsewhere.

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 Jan Dec Nov Jan'14 2014 2013 2012
General Business Conditions (ISM Adjusted) 51.7 48.5 51.9 52.8 52.4 50.0 51.8
General Business Conditions (Diffusion Index, %) 9.95 -1.23 10.33 10.35 11.83 3.87 4.22
 New Orders 6.09 0.39 9.12 8.33 7.89 1.16 1.46
 Shipments 9.59 2.55 10.61 13.90 12.09 4.52 11.20
 Unfilled Orders -8.42 -23.96 -7.45 -8.54 -9.03 -8.74 -8.83
 Delivery Time -5.26 -14.58 -9.57 -8.54 -5.17 -3.52 -0.30
 Inventories -7.37 -11.46 0.00 2.44 -1.80 -5.73 -2.91
 Number of Employees 13.68 8.33 8.51 12.20 10.85 3.73 8.62
 Prices Paid 12.63 10.42 10.64 17.11 20.90 21.53 24.71
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