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Economy in Brief

Empire State Manufacturing Much Stronger than Expected in September
by Sandy Batten  September 15, 2020

Economic activity in New York surprised market expectations in September with the Empire State General Business Conditions Index, jumping up to 17.0 from 3.7 in August and almost recouping all its lost ground in August. The Action Economics Forecast Survey had looked for a modest rise to 5.6. Of respondents, 39.8% reported increased business conditions in September, up from 33.6% in August, while 22.8% reported a decline, down from 29.8% in August. The overall measure is a diffusion index which is constructed by subtracting the percentage decrease from the percentage increase and measures the breadth of change in manufacturing activity across the state.

Haver Analytics calculates an ISM-Adjusted Index which mimics the construction of the purchasing managers' index. This figure rose to 52.5 in September, comfortably above the 50 level which separates expansion from contraction, after having dipped to 49.8 in August.

The underlying indexes in the report uniformly strengthened in September. The new orders index rose to 7.1 from -1.7 in August. The shipments measure rebounded to 14.1 in September from 6.7 in August. Delivery times increased while unfilled orders and inventories continued to decline but at a slower pace than in August.

The employment indicators were also positive. The number of employees index rose to 2.6 in September, its best reading since February, from 2.4 in August. On an even more positive note, the average workweek index jumped up to 6.7 in September, its first positive reading in eight months, from -6.8 in August.

The prices paid index rose again--to 25.2 in September from 16.0 in August, pointing to a pickup in input prices. The prices received index posted another positive reading in September, rising to 6.5 from 4.7 in August, possibly indicating that the disinflationary impact of the lockdowns is waning. The rises in August and September followed four consecutive monthly declines.

Optimism about the future also revived in September with expectations of business conditions in six months rising to 40.3 from 34.3 in August. The rebound was led by improved expectations for both orders and shipments. Of note, expected capital expenditures shot up to 18.7 in September, the highest reading since March, from 6.0 in August.

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 July 2001. The Action Economics Forecasts can be found in Haver's AS1REPNA database.

Empire State Manufacturing Survey Sep Aug Jul Sep'19 2019 2018 2017
General Business Conditions (Diffusion Index, %, SA) 17.0 3.7 17.2 2.2 4.8 19.7 16.1
General Business Conditions Index (ISM Adjusted, >50=Increasing Activity, SA) 52.5 49.8 52.6 52.4 51.8 56.4 54.6
  New Orders 7.1 -1.7 13.9 1.9 3.3 16.4 14.4
  Shipments 14.1 6.7 18.5 5.4 10.5 20.3 15.8
  Unfilled Orders -9.4 -14.0 -0.6 -2.6 -6.0 3.5 1.9
  Delivery Time 5.0 1.3 2.6 0.7 -0.1 9.1 6.1
  Inventories -3.6 -10.7 -9.7 8.5 -0.9 5.9 1.5
  Number of Employees 2.6 2.4 0.4 7.4 5.4 12.3 8.0
  Average Employee Workweek 6.7 -6.8 -2.6 3.4 2.3 7.8 4.6
  Prices Paid 25.2 16.0 14.9 29.4 26.3 45.8 29.0
  Prices Received 6.5 4.7 -4.5 9.2 10.3 19.3 11.0
Expectations 6 Months Ahead 40.3 34.3 38.4 15.5 23.9 35.2 42.6
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