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Economy in Brief

Empire State Factory Sector Index Slips; Expectations Series Dives
by Tom Moeller  February 17, 2015

The Empire State Factory Index of General Business Conditions fell to 7.78 during February, after rising to 9.95 in January. The figures remained well below the 27.41 peak reached last September. The figures are from the Federal Reserve Bank of New York. The latest roughly matched expectations for 8.3 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 52.4 from 51.7. 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 in the component series was mixed this month. The new orders figure retreated but remained in the range of the last several months. The employment reading fell significantly but remained positive. During the last ten years, there has been a 71% correlation between the index level and the m/m change in factory sector payrolls. Working the other way, the shipments figure rose to its highest level since September and the unfilled orders series recovered to its best level since October. The inventory figure was at its firmest in three months and the delivery times reading showed the slowest delivery speeds in twelve months.

The prices paid index rose and suggested the strongest pricing power since September. Twenty-two percent of respondents reported paying higher prices, also the most since September. A fairly steady eight percent realized lower prices. 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 plummeted to 25.58, the lowest level since January 2013. Most of the component series fell sharply notably shipments, new orders, unfilled orders, inventories and prices paid. The employment series fell moderately.

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 Feb Jan Dec Feb'14 2014 2013 2012
General Business Conditions (ISM Adjusted) 52.4 51.7 48.5 51.1 52.4 50.0 51.8
General Business Conditions (Diffusion Index, %) 7.78 9.95 -1.23 4.34 11.83 3.87 4.22
 New Orders 1.22 6.09 0.39 0.37 7.89 1.16 1.46
 Shipments 14.12 9.59 2.55 2.74 12.09 4.52 11.20
 Unfilled Orders -6.74 -8.42 -23.96 -6.25 -9.03 -8.74 -8.83
 Delivery Time 1.12 -5.26 -14.58 1.25 -5.17 -3.52 -0.30
 Inventories -2.25 -7.37 -11.46 -5.00 -1.80 -5.73 -2.91
 Number of Employees 10.11 13.68 8.33 11.25 10.85 3.73 8.62
 Prices Paid 14.61 12.63 10.42 25.00 20.90 21.53 24.71
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