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Economy in Brief

Empire State Manufacturing Conditions Strengthen
by Tom Moeller  February 18, 2020

The Empire State Manufacturing Index of General Business Conditions increased to a nine-month high of 12.9 during February, extending modest gains during the prior two months. A reading of 5.0 had been expected in the Action Economics Forecast Survey. Thirty-four percent of survey respondent reported improved business conditions while 21 percent reported a decline.

The ISM-Adjusted Index, constructed by Haver Analytics, surged to 56.9, the highest level since June 2018. During the last 20 years, there has been 59% correlation between the level of the index and q/q change in real GDP.

Leading this month's improvement was the new orders index as it surged to 22.1, the highest level since September 2017. The shipments series also jumped roughly ten points. The delivery times returned to positive territory, indicating slower delivery speeds. The inventories index surged to a two-year high while the unfilled orders index turned positive after falling for roughly one year.

Working lower was the employment series to 6.6, its lowest level in six months. Nineteen percent of survey respondents reported increased hiring while nine percent reported a decline. During the last 20 years, there has been a 73% correlation between the index level and the m/m change in factory sector payrolls. The average workweek reading also turned negative.

The prices paid index deteriorated to 25.0. Thirty percent of respondents reported higher prices while five percent reported a decline. The prices received showed more strength with a rise to 16.7, its highest level since March of last year.

The Expected General Business Conditions index eased slightly to 22.9 and remained well below its late-2018 highs. Expected new orders and shipments eased while inventories collapsed. The employment index edged higher, but prices paid slipped.

The Empire State figures are diffusion indexes, which are calculated by subtracting the percentage of respondents reporting declines from the percentage reporting gains. Their values range from -100 to +100. 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 Feb Jan Dec Feb'19 2019 2018 2017
General Business Conditions (Diffusion Index, %, SA) 12.9 4.8 3.3 10.3 4.8 19.7 16.1
General Business Conditions Index (ISM Adjusted, >50=Increasing Activity, SA) 56.9 52.1 51.8 52.9 51.8 56.4 54.6
  New Orders 22.1 6.6 1.7 8.1 3.3 16.4 14.4
  Shipments 18.9 8.6 9.5 12.3 10.5 20.3 15.8
  Unfilled Orders 4.5 -2.7 -13.8 -0.7 -6.0 3.5 1.9
  Delivery Time 8.3 -2.7 -5.8 5.0 -0.1 9.1 6.1
  Inventories 12.9 -0.7 2.2 -1.4 -0.9 5.9 1.5
  Number of Employees 6.6 9.0 10.4 4.8 5.4 12.3 8.0
  Average Employee Workweek -1.0 1.3 0.7 2.3 7.8 4.6
  Prices Paid 25.0 31.5 15.2 27.1 26.3 45.8 29.0
  Prices Received 16.7 14.4 4.3 22.9 10.3 19.3 11.0
Expectations 6 Months Ahead 22.9 23.6 26.1 30.9 23.9 35.2 42.6
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