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Economy in Brief

Empire State Factory Index Improves Further
by Tom Moeller  January 18, 2011

The Federal Reserve Bank of New York reported that its Empire State Factory Index of General Business Conditions improved to 11.92 following its sharp December recovery to a revised 9.89. The figure roughly equaled Consensus expectations for 13.0. Nevertheless, the index remained below last year's high of 29.71. These figures are diffusion indexes which are calculated by subtracting the percent of respondents reporting the indicator lower from those reporting the indicator higher. Thus, they have a good correlation with growth in the series covered. Separately, since inception in 2001, the business conditions index has a 78% correlation with the quarterly change in real GDP.

Improvement in the subseries was across-the-board including inventories, the average employee workweek, shipments and new orders. The employment reading rose to 8.42 from -3.41. (During the last ten years there has been an 82% correlation between the jobs index and the m/m change in factory sector payrolls.)

The prices paid index rose moderately to 35.79 though it remained down from its May high of 44.74. Since inception, there has been a 68% correlation between the index of prices paid and the monthly change in the core intermediate materials PPI.

The Empire State index of expected business conditions in six months jumped to 58.95 which was its highest level since February 2004. Improvement was in inventories, delivery times (slower), prices and new orders. A separate series of expected capital spending recovered to its highest since last May while the technology index was its highest since 2007.

The Empire State data is available in Haver's SURVEYS database. The figures are diffusion indexes. Like the Philadelphia Fed Index of General Business Conditions, the Empire State Business Conditions Index reflects answers to independent survey questions; it is not a weighted combination of the components. The series dates back only to 2001.

Empire State Manufacturing Survey Jan Dec Nov Jan'10 2010 2009 2008
General Business Conditions (diffusion index, %) 11.92 9.89 -10.44 17.21 13.80 -2.81 -9.96
 New Orders 12.39 2.03 -23.80 20.31 9.93 -2.51 -6.23
 Inventories 4.21 -15.91 0.00 -18.42 -1.48 -22.89 -7.87
 Employment 8.42 -3.41 9.09 -5.26 11.78 -17.28 -5.36
 Prices Paid 35.79 28.41 22.08 19.74 29.63 1.33 46.99
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