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Economy in Brief

Empire State Manufacturing Activity Weakens Sharply
by Tom Moeller  January 15, 2019

The Empire State Manufacturing Index of General Business Conditions declined to 3.9 in January, the lowest level since May 2017. The Action Economics Forecast Survey expected a reading of 12.0 for January. Data back through 2017 were revised. 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 fell sharply to 51.9 from 56.2. It was the lowest level in two years. 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 much lower orders, delivery times and inventories indexes. The shipments and unfilled orders indexes also fell sharply.

The employment index fell significantly during January after showing strong hiring in December. A lessened 15% of respondents reported increased employment, while a steady eight percent showed a decrease. 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. The employee workweek reading was little changed.

The prices paid index weakened to the lowest level since December 2017. Forty-one percent of respondents indicated increased prices this month, while a higher six percent reported a decrease. Prices received held steady at the lowest level since December 2017.

The series measuring expectations for business conditions in six months fell sharply to the lowest level in nearly three years due to declines 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 Jan Dec Nov Jan'18 2018 2017 2016
General Business Conditions (Diffusion Index, %, SA) 3.9 11.5 21.4 18.6 19.8 16.1 -2.6
General Business Conditions Index (ISM Adjusted, >50=Increasing Activity, SA) 51.9 56.2 57.3 55.4 56.4 54.6 48.1
  New Orders 3.5 13.4 18.6 14.3 16.5 14.5 -0.9
  Shipments 17.9 20.3 26.1 16.6 20.4 15.9 1.9
  Unfilled Orders -7.6 -5.1 0.0 4.3 3.5 1.9 -8.8
  Delivery Time -2.1 3.2 4.4 3.6 9.1 6.1 -4.8
  Inventories -7.6 7.1 10.9 13.8 5.9 1.5 -9.6
  Number of Employees 7.4 17.5 12.7 5.7 12.4 8.1 -5.1
  Average Employee Workweek 6.8 6.7 7.9 6.8 7.8 4.6 -5.1
  Prices Paid 35.9 39.7 44.5 36.2 45.8 29.0 15.7
  Prices Received 13.1 12.8 13.1 21.7 19.3 11.0 0.7
Expectations 6 Months Ahead 17.8 30.6 32.9 46.6 35.2 42.7 29.0
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