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Economy in Brief

Empire State Manufacturing Index Improves, but Prices Measure Weakens
by Tom Moeller  April 15, 2019

The Empire State Manufacturing Index of General Business Conditions rebounded to 10.1 during April and reversed the decline registered in March. Nevertheless, the latest level remained sharply below the reading of 17.9 twelve months ago and was lower than the 2017 highs. The Action Economics Forecast Survey expected a reading of 8.0 for April. 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 rebounded to 54.3, the highest level since December. During the last ten years, the index has had a 50% correlation with the quarter-to-quarter change in real GDP.

Movement amongst the component series was mostly positive during April. The new orders index improved m/m but continued to trend sideways. The shipments reading ticked higher while the inventories index strengthened to a five-month high. To the downside, the unfilled orders measure declined and reversed its March gain.

The employment index eased and remained well below the 2018 highs. An improved 20% of respondents reported increased employment, while a higher eight percent showed a decrease. During the last ten years, there has been a 64% correlation between the employment index and the month-to-month change in factory sector payrolls. The employee workweek reading rebounded m/m to the highest level in three months, but remained down sharply y/y.

The decline in the prices paid index continued its weakening since the May 2018 peak. Twenty-seven percent of respondents indicated increased prices this month while six percent reported a decrease. The prices received index also declined sharply for a second month.

The series measuring expectations for business conditions in six months declined sharply to the lowest level in over three years. Weakness amongst the component series was broad-based, including a lower reading for capital spending intentions.

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 Apr Mar Feb Apr'18 2018 2017 2016
General Business Conditions (Diffusion Index, %, SA) 10.1 3.7 8.8 17.9 19.8 16.1 -2.6
General Business Conditions Index (ISM Adjusted, >50=Increasing Activity, SA) 54.3 52.6 52.5 56.1 56.4 54.6 48.1
  New Orders 7.5 3.0 7.5 12.0 16.5 14.5 -0.9
  Shipments 8.6 7.7 10.4 17.1 20.4 15.9 1.9
  Unfilled Orders -0.7 2.2 -0.7 3.7 3.5 1.9 -8.8
  Delivery Time 7.0 1.4 5.0 15.6 9.1 6.1 -4.8
  Inventories 8.4 0.0 -1.4 8.1 5.9 1.5 -9.6
  Number of Employees 11.9 13.8 4.1 7.8 12.4 8.1 -5.1
  Average Employee Workweek 4.3 -3.4 2.5 12.8 7.8 4.6 -5.1
  Prices Paid 27.3 34.1 17.1 47.4 45.8 29.0 15.7
  Prices Received 14.0 18.1 22.9 20.7 19.3 11.0 0.7
Expectations 6 Months Ahead 12.4 29.6 32.3 19.3 35.2 42.7 29.0
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