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Economy in Brief

Empire State Factory Sector Index Remains Under Pressure
by Tom Moeller  July 15, 2015

The Empire State Factory Index of General Business Conditions showed modest improvement this month to 3.86 after its decline to -1.98 in June. The latest figure remained, however, well under the 27.41 peak reached last September. The latest compared to expectations for 2.0 in the Action Economics Forecast Survey. The figures are reported by the Federal Reserve of New York.

Based on these figures, Haver Analytics calculates a seasonally adjusted index that is compatible to the ISM series. The adjusted figure declined m/m to 49.9, below break-even for the first time since December. 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 change in real GDP.

Movement in the component series remained mixed. Improvement in the overall index reflected shorter delivery times, higher unfilled orders, a longer average workweek and improved prices received. The new orders, shipments, unfilled orders and inventory indexes each deteriorated. Employment also declined to the lowest reading since December 2013. During the last ten years, there has been a 72% correlation between the index level and the m/m change in factory sector payrolls.

The prices paid index fell to its lowest point since July 2012. Fourteen percent of respondents reported paying higher prices, down from 79% in mid-2008. Six 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 improved slightly and but still roughly matched its three-year low.

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 dates back to 2001. The Consensus expectation figure can be found in Haver's AS1REPNA database.

Empire State Manufacturing Survey Jul Jun May Jul'14 2014 2013 2012
General Business Conditions Index (ISM Adjusted, >50=Increasing Activity, SA) 49.9 51.9 52.1 55.1 52.4 50.0 51.8
General Business Conditions (Diffusion Index, %, SA) 3.86 -1.98 3.09 22.60 11.83 3.87 4.22
 New Orders -3.50 -2.12 3.85 17.79 7.89 1.16 1.46
 Shipments 7.88 12.01 14.94 21.01 12.09 4.52 11.20
 Unfilled Orders -7.45 -4.81 -11.46 -6.82 -9.03 -8.74 -8.83
 Delivery Time 0.00 -1.92 -10.42 -1.14 -5.17 -3.52 -0.30
 Inventories -8.51 1.92 7.29 -3.41 -1.80 -5.73 -2.91
 Number of Employees 3.19 8.65 5.21 17.05 10.85 3.73 8.62
 Prices Paid 7.45 9.62 9.38 25.00 20.90 21.53 24.71
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