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Economy in Brief

Empire State Manufacturing Index Shows Modest Improvement in November
by Carol Stone, CBE  November 15, 2022

•General business conditions seen slightly positive.

•Shipments and delivery times increase; new and unfilled orders down somewhat

•Prices paid index and prices received both increase.

The Empire State Manufacturing Index of General Business Conditions was 4.5 in November, an improvement from October’s -9.1. This latest reading is the first positive one since July. Also, it is more favorable than the Action Economics Forecast Survey, which anticipated -7.5. The latest survey was conducted between November 2 and 9.

Haver Analytics constructs an ISM-adjusted Empire State diffusion index using methodology similar to the ISM series and information from five component indexes in the survey. This measure had an improvement, registering 53.7, up from 51.5 in October.

The headline index reflects the answer to a single question on general business conditions. As last month, the details in this report are mixed. Shipments were stronger, rising at 36.1% of respondents while declining at 28.0%, yielding an index reading of +8.0, versus -0.3 in October. But new orders increased at 29.1% this month and decreased at 32.4%, for an index reading of -3.3, noticeably less than October’s +3.7. The increase in shipments combined with the decrease in new orders produced a decline in unfilled orders, which had an index of -6.8 after October’s -3.7. Delivery times did lengthen with an index of 2.9 after a negative reading of -0.9 last month.

Inventories grew, with a November index of 16.5, up from 4.6 in October. The positive reading in November reflected a noticeable decline in the share of firms with lower inventories as well as a moderating increase in firms with larger inventories.

The labor-related components were both positive: the index of the number of employees increased from 7.7 to 12.2, reflecting an increase in firms reporting more employees in November over October and a decrease in firms reporting fewer employees. The average workweek index rose to 6.9 from 3.3, with again, an increase in companies where the workweek was longer and a decrease in companies with a shorter workweek.

Inflation pressure was evident in the prices paid readings, where the number of firms paying lower prices decreased, showing just 3.9% in November, down from 6.4% in October. There was also a decrease in the share of firms paying higher prices, but that was a very modest move from 55.0% to 54.4%. So the overall prices paid index increased from 48.6 to 50.5. Prices received had a somewhat similar pattern; while the number of firms collecting higher prices increased modestly to 30.1% from 29.4%, the share of firms receiving lower prices decreased to just 2.9% from 6.4%. These moves produced a prices received index of 27.2 this month, up from 22.9 in October.

Looking ahead six months, the respondents were more pessimistic. The general business conditions reading fell to -6.1 from -1.8. New orders, shipments and inventories all moved in a negative direction while unfilled orders and delivery times did improve but that’s because they were less negative than their respective October readings. Inflation expectations decreased modestly.

The Empire State data, reported by the Federal Reserve Bank of New York, reflect business conditions in the manufacturing sector in New York State. 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.

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