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Economy in Brief

Empire State Manufacturing Index Increases Again While Prices Ease
by Tom Moeller  May 15, 2019

The Empire State Manufacturing Index of General Business Conditions strengthened to 17.8 during May, the highest level in six months. The latest level, however, remained below the high of 27.1 in October 2017. The Action Economics Forecast Survey expected a reading of 8.0 for May. 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 to 52.7 and reversed the prior month's increase. During the last ten years, there has been a 49% correlation between the index level and the quarter-to-quarter change in real GDP.

Movement amongst the component series was mixed during May. The new orders index improved to the highest level since December. The shipments reading also rose to a four-month high. The unfilled orders measure improved modestly. In negative territory, the inventories index weakened and indicated a sharp rate of inventory liquidation.

The employment index declined and remained well below the 2018 highs. A lessened 19% of respondents reported higher employment, while an increased 14% showed a decrease. During the last ten years, there has been a 56% correlation between the employment index and the month-to-month change in factory sector payrolls. The employee workweek reading held steady at the highest level in four months , but was down sharply y/y.

The slip in the prices paid index kept it on the same weakening trend since the May 2018 peak. Thirty-two percent of respondents indicated increased prices this month while six percent reported a decrease. The prices received index also eased m/m and is down sharply over the last three months.

The series measuring expectations for business conditions in six months recovered its April shortfall. Movement amongst the component series was mixed, including higher readings for new orders & shipments but lower figures for employment & delivery times. The capital spending intentions index was fairly steady m/m, but down y/y.

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 May Apr Mar May'18 2018 2017 2016
General Business Conditions (Diffusion Index, %, SA) 17.8 10.1 3.7 20.6 19.8 16.1 -2.6
General Business Conditions Index (ISM Adjusted, >50=Increasing Activity, SA) 52.7 54.3 52.6 57.2 56.4 54.6 48.1
  New Orders 9.7 7.5 3.0 17.4 16.5 14.5 -0.9
  Shipments 16.3 8.6 7.7 20.0 20.4 15.9 1.9
  Unfilled Orders 2.1 -0.7 2.2 5.0 3.5 1.9 -8.8
  Delivery Time 0.7 7.0 1.4 13.7 9.1 6.1 -4.8
  Inventories -4.1 8.4 0.0 10.1 5.9 1.5 -9.6
  Number of Employees 4.7 11.9 13.8 11.1 12.4 8.1 -5.1
  Average Employee Workweek 4.4 4.3 -3.4 10.1 7.8 4.6 -5.1
  Prices Paid 26.2 27.3 34.1 54.0 45.8 29.0 15.7
  Prices Received 12.4 14.0 18.1 23.0 19.3 11.0 0.7
Expectations 6 Months Ahead 30.6 12.4 29.6 33.2 35.2 42.7 29.0
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