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Economy in Brief

Empire State Manufacturing Sector Improvement Moderates
by Tom Moeller  December 17, 2018

The Empire State Manufacturing Index of General Business Conditions declined to 10.9 in December, the lowest level since May 2017. Nonetheless, for the year as a whole, the index stood at the highest level since 2006. The Action Economics Forecast Survey expected a reading of 20.7 for December. The Empire State data, reported by the Federal Reserve Bank of New York, reflect business conditions in New York, northern New Jersey and southern Connecticut.

Haver Analytics calculates a seasonally adjusted index that is comparable to the ISM series. The calculated figure eased modestly to 57.2 from 57.8. During the last ten years, the index has had a 66% correlation with the quarter-to-quarter change in real GDP.

Deterioration in the component series was broad-based last month and led by the orders index, though it rose moderately for the year. The shipments index eased m/m but surged for the year as a whole. The unfilled orders, delivery times and inventories exhibited similar performance.

The employment index surged during December and showed a record degree of hiring. The series dates back to 2001. During the last ten years, there has been a 77% correlation between the employment index and the month-to-month change in factory sector payrolls. A near-record 35% of respondents reported increased employment, while a lessened 9% showed a decrease. The employee workweek reading was little-changed.

The prices paid index weakened to the lowest level in 12 months, but for the year surged to a 10-year high. Forty-one percent of respondents indicated increased prices this month, while just one percent reported a decrease. Prices received weakened to the lowest level since December of last year.

The series measuring expectations for business conditions in six months slipped somewhat due to backpedaling in most categories.

The Empire State figures are diffusion indexes, which are calculated by subtracting the percent of respondents reporting declines from those reporting gains. The data are available in Haver's SURVEYS database. The ISM-adjusted headline index dates back to 2001. The Action Economics Forecasts can be found in Haver's AS1REPNA database.

Empire State Manufacturing Survey Dec Nov Oct Dec'17 2018 2017 2016
General Business Conditions (Diffusion Index, %, SA) 10.9 23.3 21.1 19.6 19.7 16.1 -2.6
General Business Conditions Index (ISM Adjusted, >50=Increasing Activity, SA) 57.2 57.8 56.4 57.1 56.4 54.6 48.2
  New Orders 14.5 20.4 22.5 19.0 16.5 14.6 -0.8
  Shipments 21.0 28.0 26.3 23.5 20.3 15.9 1.9
  Unfilled Orders -5.1 0.0 -8.4 -8.7 3.5 1.9 -8.8
  Delivery Time 3.2 4.4 5.0 4.3 9.1 6.1 -4.8
  Inventories 7.1 10.9 0.8 1.4 5.9 1.5 -9.6
  Number of Employees 26.1 14.1 9.0 22.9 12.5 8.3 -5.1
  Average Employee Workweek 8.0 9.2 0.2 9.3 7.9 4.9 -5.2
  Prices Paid 39.7 44.5 42.0 29.7 45.8 29.0 15.7
  Prices Received 12.8 13.1 14.3 11.6 19.3 11.0 0.7
Expectations 6 Months Ahead 30.6 33.6 29.0 46.3 35.1 42.6 29.0
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