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Economy in Brief

Empire State Factory Sector Index Moves To New High
by Tom Moeller  July 15, 2014

The Empire State Factory Index of General Business Conditions jumped during July to 25.60 from 19.28 in June. The Federal Reserve Bank of New York reported that it was the highest level since April 2010 and beat expectations for a decline to 17.50 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 inched higher to 55.50 this month, 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 July index was led by a higher shipments reading to its highest level since May 2011. That was followed by a higher employment index which recouped most of its June 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 new orders series inched higher to its highest level since June 2010. Elsewhere, the component series moved lower including the unfilled orders and the delivery times indexes. The latter indicated the quickest delivery speeds in three months.

Posting a sharp recovery was the prices paid index to its highest level since February. Thirty 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 dropped sharply to 28.47, its lowest level since June of last year. Declines were broad-based but notable for the new orders, shipments, unfilled orders, inventory and capital spending series.

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 Jul Jun May Jul'13 2013 2012 2011
General Business Conditions (ISM Adjusted) 55.50 55.40 55.00 51.20 50.0 51.8 51.8
General Business Conditions (Diffusion Index, %) 25.60 19.28 19.01 8.88 3.82 4.29 4.48
 New Orders 18.77 18.36 10.44 3.99 1.13 1.47 4.04
 Shipments 23.64 14.15 17.44 8.26 4.49 11.22 9.47
 Unfilled Orders -6.82 -1.08 -1.10 -8.70 -8.74 -8.83 -5.29
 Delivery Time -1.14 1.08 -1.10 3.26 -3.52 -0.30 -0.91
 Inventories -3.41 9.68 2.20 -6.52 -5.73 -2.91 -1.80
 Number of Employees 17.05 10.75 20.88 3.26 3.73 8.62 6.68
 Prices Paid 25.00 17.20 19.78 17.39 21.53 24.71 40.66
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