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Economy in Brief

Empire State Factory Index Deteriorates
by Tom Moeller  April 15, 2014

The Federal Reserve Bank of New York indicated that its Empire State Factory Index of General Business Conditions for April declined to 1.29 from 5.61 during March. The latest was the lowest since November and fell short of expectations for 8.0, 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 also declined this month to 49.6. 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 April index was led by sharp declines in inventories, new orders, delivery times and shipments. The unfilled orders index was less negative but the average workweek gave up most of the improvement during the prior two months. The employment index, however, recovered half of its March decline. During the last ten years there has been a 75% correlation between the jobs index and the m/m change in factory sector payrolls.

The prices paid index ticked up slightly but remained well below the high three months ago. Twenty seven percent of respondents reported paying higher prices while five 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 recovered to 38.23, making up most of March's decline. Higher readings for inventories, employment, unfilled orders and capital expenditures were countered by lower figures for prices paid, new orders and delivery times.

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 Apr Mar Feb Apr'13 2013 2012 2011
General Business Conditions (ISM Adjusted) 49.6 51.7 50.9 50.1 50.0 51.8 51.8
General Business Conditions (Diffusion Index, %) 1.29 5.61 4.48 2.46 3.82 4.29 4.48
 New Orders -2.77 3.13 -0.21 1.40 1.13 1.47 4.04
 Shipments 3.15 3.97 2.13 0.51 4.49 11.22 9.47
 Unfilled Orders -13.27 -16.47 -6.25 -3.41 -8.74 -8.83 -5.29
 Delivery Time -9.18 -3.53 1.25 -3.41 -3.52 -0.30 -0.91
 Inventories -3.06 7.06 -5.00 -4.55 -5.73 -2.91 -1.80
 Number of Employees 8.16 5.88 11.25 6.82 3.73 8.62 6.68
 Prices Paid 22.45 21.18 25.00 28.41 21.53 24.71 40.66
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