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Economy in Brief

Coronavirus Closings Plunge Empire State Manufacturing Index to Record Low
by Sandy Batten  April 15, 2020

The Empire State Manufacturing Index of General Business Conditions collapsed to -78.2 in April from -21.5 in March. The April reading was the lowest on record, by far surpassing the previous low of -34.3 reached during the Great Recession in 2009. The Action Economics Forecast panel had expected a fall to -30. A record 85.2% of respondents reported weaker business conditions in April while only 7.0% report stronger conditions. This is a diffusion index, which measures how widely dispersed a change is across an area. With nonessential businesses in the New York area having been closed in late March, it is not surprising that a wide swath of respondents reported that conditions had weakened.

The ISM-Adjusted Index, constructed by Haver Analytics, also deteriorated markedly in April, to 31.2 from 49.5 in March. This was again a record low, but only slightly below the previous record low of 35.2 reached during the Great Recession.

As would be expected given the collapse in the headline figure, the subindexes also posted substantial declines in April with new orders and shipments each falling to a record low. New orders plummeted to -66.3 in April from -9.3 in March. Shipments plunged to -68.1 in April from -1.7 in March. These calamitous drops greatly surpassed the previous record lows which were both reached during the Great Recession: -43.8 for new orders and -25.2 for shipments. The delivery time index actually rose in April, signaling longer delivery times. This would normally indicate a growing economy in which demand is stretching supply. However, in the current environment, it likely indicates that supply chains have been severely disrupted by the business closures that have been dictated by the coronavirus

Employment indicators also declined to record lows in April. The number of employees index plunged to -55.3 from -1.5 in March while the average workweek index plummeted to -61.6 in April from -10.6.

The prices paid index only eased to 5.8 from 24.5 while the prices received index fell more markedly to -8.4 from 10.1.

The behavior of the Expected General Business Conditions index indicated that on average the respondents thought the recent hit to business conditions would not linger very long. The expected conditions index rose to 7.0 in April from 1.2 in March. However, there was little consensus on what business conditions would look like in six months. Of the respondents, 48.6% thought conditions in six months would be improved while 41.6% thought they would be weaker.

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 Apr Mar Feb Apr'19 2019 2018 2017
General Business Conditions (Diffusion Index, %, SA) -78.2 -21.5 12.9 9.4 4.8 19.7 16.1
General Business Conditions Index (ISM Adjusted, >50=Increasing Activity, SA) 31.2 49.5 56.9 54.3 51.8 56.4 54.6
  New Orders -66.3 -9.3 22.1 7.4 3.3 16.4 14.4
  Shipments -68.1 -1.7 18.9 10.3 10.5 20.3 15.8
  Unfilled Orders -16.8 1.4 4.5 -0.7 -6.0 3.5 1.9
  Delivery Time 11.0 2.2 8.3 7.0 -0.1 9.1 6.1
  Inventories -9.7 5.8 12.9 8.4 -0.9 5.9 1.5
  Number of Employees -55.3 -1.5 6.6 9.7 5.4 12.3 8.0
  Average Employee Workweek -61.6 -10.6 -1.0 3.1 2.3 7.8 4.6
  Prices Paid 5.8 24.5 25.0 27.3 26.3 45.8 29.0
  Prices Received -8.4 10.1 16.7 14.0 10.3 19.3 11.0
Expectations 6 Months Ahead 7.0 1.2 22.9 17.4 23.9 35.2 42.6
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