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Economy in Brief

Empire State Factory Sector Index Garners Additional Strength
by Tom Moeller  June 16, 2014

The Empire State Factory Index of General Business Conditions improved during June to 19.28 from 19.01 in May. The Federal Reserve Bank of New York reported that it was the highest level since June 2010 and beat expectations for a decline to 15.0 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 also rose this month to 55.40 from 55.0, the highest level since May 2012. A rising level of activity is indicated by a figure above 50. Since inception in 2001, the business conditions index has had a 67% correlation with the quarterly change in real GDP.

Improvement in the overall June index was led by a higher new orders reading. That was followed by a longer workweek, rising inventories, shorter delivery times and more unfilled orders. The employment index pulled back but continued show growth in payrolls. 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 shipments series also pulled back.

Also declining was the prices paid index to its lowest level in six months. Twenty-two percent of respondents reported paying higher prices while four 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 retreated to 39.84 but remained up sharply from the 2012 low. Lower readings for capital expenditures and technology spending were accompanied by improvement in most other components.

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 June May Apr June'13 2013 2012 2011
General Business Conditions (ISM Adjusted) 55.40 55.00 49.6 47.20 50.0 51.8 51.8
General Business Conditions (Diffusion Index, %) 19.28 19.01 1.29 7.09 3.82 4.29 4.48
 New Orders 18.36 10.44 -2.77 -4.32 1.13 1.47 4.04
 Shipments 14.15 17.44 3.15 -6.30 4.49 11.22 9.47
 Unfilled Orders -1.08 -1.10 -13.27 -14.52 -8.74 -8.83 -5.29
 Delivery Time 1.08 -1.10 -9.18 -6.45 -3.52 -0.30 -0.91
 Inventories 9.68 2.20 -3.06 -11.29 -5.73 -2.91 -1.80
 Number of Employees 10.75 20.88 8.16 0.00 3.73 8.62 6.68
 Prices Paid 17.20 19.78 22.45 20.97 21.53 24.71 40.66
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