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Economy in Brief


Empire State Factory Index Backpedals
by Tom Moeller  February 18, 2014

The Federal Reserve Bank of New York indicated that its Empire State Factory Index of General Business Conditions for February fell to 4.48 from its two year high of 12.51 during January. The latest figure fell short of expectations for a level of 9.5, according to 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 declined to 50.9, but a rising level of activity is indicated by a figure above 50. Since inception in 2001, the business conditions index has a 67% correlation with the quarterly change in real GDP.

Deterioration in the overall index this month reflected sharp declines in the new orders, shipments and inventories indexes. The number of employees series also slipped marginally. During the last ten years there has been a 75% correlation between the jobs index and the m/m change in factory sector payrolls. Improved readings for unfilled orders and delivery times dampened some of the downward pressure on the overall index. The length of the average workweek reading also gained slightly to its highest level in six months.

The prices paid index fell back somewhat to 25.00 following its sharp January improvement. Twenty six percent of respondents reported paying higher prices while 1 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 inched up to 38.99, its highest level since October. Higher readings for inventories, shipments, new orders and employment were offset by lower figures for prices paid, capital expenditures and technology spending.

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 is in Haver's AS1REPNA database.

Empire State Manufacturing Survey Feb Jan Dec Feb'13 2013 2012 2011
General Business Conditions (ISM Adjusted) 50.9 53.3 47.2 53.0 50.0 51.8 51.8
General Business Conditions (Diffusion Index, %) 4.48 12.51 2.22 7.25 3.82 4.29 4.48
 New Orders -0.21 10.98 -1.69 9.84 1.13 1.47 4.04
 Shipments 2.13 15.52 4.69 9.72 4.49 11.22 9.47
 Unfilled Orders -6.25 -8.54 -24.10 -2.02 -8.74 -8.83 -5.29
 Delivery Time 1.25 -8.54 -9.64 2.02 -3.52 -0.30 -0.91
 Inventories -5.00 2.44 -21.69 0.00 -5.73 -2.91 -1.80
 Number of Employees 11.25 12.20 0.00 8.08 3.73 8.62 6.68
 Prices Paid 25.00 36.59 15.66 26.26 21.53 24.71 40.66
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