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Economy in Brief

U.S. Empire State Index Improved Slightly in February
by Kathleen Stephansen, CBE  February 15, 2022

• Empire State business activity improved slightly in February.

• New orders and shipments held steady, while labor market indicators were solid.

• The prices received index reached a new record high.

The Empire State Manufacturing Index of General Business Conditions moved up four points to 3.1 in February from -0.7 in January. A reading of 12.0 had been expected in the Action Economics Forecast Survey. An increased 33.5% of respondents reported improved business conditions in February versus 22.1% in January, while 30.5% reported that conditions had worsened from 22.8% in January. The latest survey was conducted between February 2 and February 9.

Haver Analytics constructs an ISM-adjusted Empire State diffusion index using methodology similar to the ISM series. The latest reading improved slightly to 56.1 from 54.4 in January. It remains well below the July high of 63.4. A reading above 50 signifies growth. In contrast to the ISM index, the headline Empire Index reflects the answer to a single question, not calculated from its components.

The Empire State component series generally improved in February. The new orders measure rose to 1.4 from -5.0 in January. Shipments improved slightly to 2.0 in February from 1.0 in January, as 32.5% of respondents reported higher shipments versus 24.1% in January, and 29.6% reported a decline in shipments versus 23.1% in January.

The delivery time index remained at 21.6 in February, unchanged from January. Thirty five percent of respondents reported increased delivery times versus 29.3% in January, while 13.5% reported shorter deliver times versus 7.8% in January. The unfilled orders series rose to 14.4 in February from 12.1 in January. The inventory index rose again in February to 11.7 from 10.3 in January, its highest level in four months.

Employment indicators were solid. The number of employees index rose to 23.1 in February from 16.1 in January. Twenty nine percent of respondents reported increases in employment versus 20.0% in January, while 6.3% reported a decline in employment after 3.9% did so in January. The average workweek series improved slightly to 10.9 after falling to 10.3 in January.

Inflation pressures were mixed this month. The prices paid index stood at 76.6 after the January decline to 76.7 and reached its lowest point since September of last year. The record high was 83.5 in May 2021. A higher 79.3% of respondents paid higher prices, from 77.6% in January, and 2.7% paid less in February versus 0.9% in January. The prices received measure jumped to a new record high of 54.1 in February from 37.1 in January and signaling ongoing substantial increases in both input prices and selling prices.

The index of expected business conditions in six months eased to 28.2 in February from 35.1 in January. It had been as high as 52.0 in October. Expectations for shipments, delivery times and employment rose, while expectations for unfilled orders, prices paid and received eased. Capital spending and technology spending remained near a multi-year high, suggesting that firms plan significant increases in capital spending.

The Empire State data, reported by the Federal Reserve Bank of New York, reflect business conditions in the manufacturing sector in New York, northern New Jersey and southern Connecticut. The headline measure is constructed from the answer to a single question on business conditions. The Empire State figures are diffusion indexes, which are calculated by subtracting the percent of respondents reporting declines from the percent 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 Feb Jan Dec Feb'21 2021 2020 2019
General Business Conditions (Diffusion Index, %, SA) 3.1 -0.7 31.9 12.1 23.3 -5.9 4.8
General Business Conditions Index (ISM Adjusted, >50=Increasing Activity, SA) 56.1 54.4 60.8 54.2 58.9 49.3 51.8
  New Orders 1.4 -5.0 27.1 10.8 21.7 -4.3 3.3
  Shipments 2.9 1.0 27.1 4.0 20.1 -0.2 10.5
  Unfilled Orders 14.4 12.1 19.0 2.6 12.5 -7.7 -6.0
  Delivery Time 21.6 21.6 23.1 9.1 23.8 2.7 -0.1
  Inventories 11.7 10.3 9.1 6.5 7.8 -3.9 -0.9
  Number of Employees 23.1 16.1 21.4 12.1 15.9 -1.2 5.4
  Average Employee Workweek 10.9 10.3 12.1 9.0 14.2 -6.9 2.3
  Prices Paid 76.6 76.7 80.2 57.8 73.0 21.5 26.3
  Prices Received 54.1 37.1 44.6 23.4 36.7 4.8 10.3
Expectations 6 Months Ahead 28.2 35.1 36.4 34.9 40.6 29.7 23.9
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