Global| Oct 15 2014Empire State Factory Sector Index Backpedals
by:Tom Moeller
|in:Economy in Brief
Summary
The Federal Reserve Bank of New York reported that its Empire State Factory Index of General Business Conditions declined to 6.17 during October, reversing all of this year's gains. It fell short of expectations for 20.9 in the Action [...]
The Federal Reserve Bank of New York reported that its Empire State Factory Index of General Business Conditions declined to 6.17 during October, reversing all of this year's gains. It fell short of expectations for 20.9 in the Action Economics Forecast Survey.
Based on these figures, Haver Analytics calculates a seasonally adjusted index that is compatible to the ISM series. The adjusted figure fell sharply to 50.6 this month from 53.4 and was at the lowest level in six months. A rising level of activity is indicated by a figure above 50. Since inception in 2001, the business conditions index has had a 68% correlation with the quarterly change in real GDP.
Movement amongst the component series was mixed. The shipments series led the way down to the lowest point since June of last year. New orders also fell to the lowest level in six months. Delivery times remained negative for the third straight month, at the lowest level since April. Elsewhere, the component series improved. Unfilled orders and inventories were up moderately. The employment series made up most of the September decline but remained well below its May high. During the last ten years there has been a 71% correlation between the index level and the m/m change factory sector payrolls.
The prices paid index fell to the lowest level since July 2012. A sharply reduced 16 percent of respondents reported paying higher prices while a higher 5 percent paid less. During the last ten years, there has been a 70% correlation between the index and the 3-month change in the intermediate goods PPI.
Looking ahead, the Empire State index of expected business conditions in six months fell to 41.66, its lowest level in three months. The new orders, shipments, employment, workweek and inventories series moved lower. Capital expenditures moved up to the highest level in six months while technology spending was at the highest point since early last year.
The Empire State figures are diffusion indexes which are calculated by subtracting the percent of respondents reporting poorer business conditions from those reporting improvement. Thus, they have a good correlation with growth in the series covered. The data is available in Haver's SURVEYS database. The ISM-adjusted headline index is calculated by Haver Analytics. The series date back only to 2001. The Consensus expectation figure can be found in Haver's AS1REPNA database.
| Empire State Manufacturing Survey | Oct | Sept | Aug | Oct'13 | 2013 | 2012 | 2011 |
|---|---|---|---|---|---|---|---|
| General Business Conditions (ISM Adjusted) | 50.6 | 53.4 | 53.2 | 51.2 | 50.0 | 51.8 | 51.8 |
| General Business Conditions (Diffusion Index, %) | 6.17 | 27.54 | 14.69 | 3.24 | 3.82 | 4.29 | 4.48 |
| New Orders | -1.73 | 16.86 | 14.14 | 6.60 | 1.13 | 1.47 | 4.04 |
| Shipments | 1.12 | 27.08 | 24.59 | 12.98 | 4.49 | 11.22 | 9.47 |
| Unfilled Orders | -4.55 | -10.87 | -7.95 | -6.02 | -8.74 | -8.83 | -5.29 |
| Delivery Time | -5.68 | -5.43 | -5.68 | -10.84 | -3.52 | -0.30 | -0.91 |
| Inventories | 2.27 | -7.61 | -14.77 | 0.00 | -5.73 | -2.91 | -1.80 |
| Number of Employees | 10.23 | 3.26 | 13.64 | 3.61 | 3.73 | 8.62 | 6.68 |
| Prices Paid | 11.36 | 23.91 | 27.27 | 21.69 | 21.53 | 24.71 | 40.66 |
Tom Moeller
AuthorMore in Author Profile »Prior to joining Haver Analytics in 2000, Mr. Moeller worked as the Economist at Chancellor Capital Management from 1985 to 1999. There, he developed comprehensive economic forecasts and interpreted economic data for equity and fixed income portfolio managers. Also at Chancellor, Mr. Moeller worked as an equity analyst and was responsible for researching and rating companies in the economically sensitive automobile and housing industries for investment in Chancellor’s equity portfolio. Prior to joining Chancellor, Mr. Moeller was an Economist at Citibank from 1979 to 1984. He also analyzed pricing behavior in the metals industry for the Council on Wage and Price Stability in Washington, D.C. In 1999, Mr. Moeller received the award for most accurate forecast from the Forecasters' Club of New York. From 1990 to 1992 he was President of the New York Association for Business Economists. Mr. Moeller earned an M.B.A. in Finance from Fordham University, where he graduated in 1987. He holds a Bachelor of Arts in Economics from George Washington University.
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