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Economy in Brief

Empire State Manufacturing Conditions Index Collapses
by Tom Moeller  March 16, 2020

The Empire State Manufacturing Index of General Business Conditions fell to -21.5 during March from 12.9 in February. It was the weakest reading since March 2009. A level of 5.0 had been expected in the Action Economics Forecast Survey. A greatly lessened 20% of survey respondents reported improved business conditions while a surging 41.6% reported a decline.

The ISM-Adjusted Index, constructed by Haver Analytics, deteriorated to 49.5, the lowest level since last July. 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 weakness was a collapse in the new orders index to -9.3, the lowest reading in nine month. The shipments series also deteriorated 20.6 points to -1.7. The unfilled orders series weakened greatly and the delivery times fell, indicating quicker delivery speeds. The inventories index also declined.

Also working lower was the employment series to -1.5, its lowest level since July of last year. A lessened five percent of survey respondents reported increased hiring while an increased 19% 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 eased to 24.5. Twenty-seven percent of respondents reported higher prices while two percent paid less. The prices received index displayed a greater degree of weakness as it fell to 10.1 from 16.7.

The Expected General Business Conditions index declined sharply to 1.2, down more than 20 points from February. Expected new orders, shipments and delivery times collapsed. The employment index fell to the lowest level in three years, and prices paid weakened sharply.

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 Mar Feb Jan Mar'19 2019 2018 2017
General Business Conditions (Diffusion Index, %, SA) -21.5 12.9 4.8 5.1 4.8 19.7 16.1
General Business Conditions Index (ISM Adjusted, >50=Increasing Activity, SA) 49.5 56.9 52.1 52.8 51.8 56.4 54.6
  New Orders -9.3 22.1 6.6 3.6 3.3 16.4 14.4
  Shipments -1.7 18.9 8.6 9.7 10.5 20.3 15.8
  Unfilled Orders 1.4 4.5 -2.7 2.2 -6.0 3.5 1.9
  Delivery Time 2.2 8.3 -2.7 1.4 -0.1 9.1 6.1
  Inventories 5.8 12.9 -0.7 0.0 -0.9 5.9 1.5
  Number of Employees -1.5 6.6 9.0 13.7 5.4 12.3 8.0
  Average Employee Workweek -10.6 -1.0 1.3 -1.8 2.3 7.8 4.6
  Prices Paid 24.5 25.0 31.5 34.1 26.3 45.8 29.0
  Prices Received 10.1 16.7 14.4 18.1 10.3 19.3 11.0
Expectations 6 Months Ahead 1.2 22.9 23.6 27.9 23.9 35.2 42.6
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