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Economy in Brief

Empire State Factory Sector Activity Remains Negative
by Tom Moeller  November 16, 2015

The Empire State Factory Index of General Business Conditions remained negative for the fourth consecutive month during November. The reading of -10.74 compared to an unrevised -11.36 in October. These diffusion indexes were nearly the lowest since April 2009. The latest figure disappointed expectations for -6.0 in the Action Economics Forecast Survey. The data are reported by the Federal Reserve of New York and reflect business conditions in New York, northern New Jersey and southern Connecticut.

Based on these figures, Haver Analytics calculates a seasonally adjusted index that is compatible to the ISM series. The adjusted figure improved slightly to 47.0, but also was near the six-year low. A rising level of activity is indicated by a figure above 50. Since inception in 2001, the business conditions index has had a 62% correlation with the change in real GDP.

The component series showed mixed results this month. The employment figure remained in negative territory for the third month, near its lowest point since December 2012. During the last ten years, there has been a 72% correlation between the employment series and the m/m change in factory sector payrolls. New orders neared the lowest level since 2009. Shipments improved but still were at a three-month low. Vendor delivery speeds remained at the fastest pace since December 2014 and unfilled orders declined.

The prices paid index improved slightly to the highest point in three months. A sharply reduced 11% of respondents reported higher prices but a sharply reduced 6% reported them lower. Prices received remained in negative territory.

Expectations for business conditions fell sharply to the lowest level since November 2012. New orders and shipments deteriorated sharply but unfilled orders and inventories surged. Employment also gained to the highest level in six months but prices paid remained weak.

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 Action Economics figure can be found in Haver's AS1REPNA database.

The Transmission of Exchange Rate Changes to Output and Inflation is the title of last week's speech by Fed Vice Chairman Stanley Fischer and it can be found here.

Empire State Manufacturing Survey Nov Oct Sep Nov'14 2014 2013 2012
General Business Conditions Index (ISM Adjusted, >50=Increasing Activity, SA) 47.0 46.3 46.1 53.8 53.4 50.7 51.9
General Business Conditions (Diffusion Index, %, SA) -10.74 -11.36 -14.67 10.33 11.83 3.87 4.22
 New Orders -11.82 -18.91 -12.91 9.12 7.89 1.16 1.46
 Shipments -4.10 -13.61 -7.98 10.61 12.09 4.52 11.20
 Unfilled Orders -18.18 -15.09 -8.25 -7.45 -9.03 -8.74 -8.83
 Delivery Time -10.91 -11.32 -6.19 -9.57 -5.43 -3.52 -0.30
 Inventories -17.27 -7.55 -18.56 0.00 -1.80 -5.73 -2.91
 Number of Employees -7.27 -8.49 -6.19 8.51 10.85 3.73 8.62
 Prices Paid 4.55 0.94 4.12 10.64 20.90 21.53 24.71
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