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Economy in Brief

Empire State Factory Sector Index Declines; Pricing Power Heats Up
by Tom Moeller  August 15, 2014

The Empire State Factory Index of General Business Conditions retreated to 14.69 during August after having moved to 25.60 in July. The Federal Reserve Bank of New York reported that it was the lowest level since April and fell short of expectations for a slip to 20.0 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 fell to 53.20 this month, also the lowest level since April. 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.

Declines amongst the component series were widespread and paced by a lower inventory figure and a lower delivery time number, which indicates faster speeds. That was followed by a lower new orders number and a slightly lower employment index. During the last ten years there has been a 75% correlation between the jobs index and the m/m change in factory sector payrolls. Elsewhere, the shipments component moved higher to its highest level since October 2009 and the average workweek rose slightly.

The prices paid index also continued its recent improvement with a gain to its highest level since January. Thirty 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 recovered its July decline with a rise to 46.76, its highest level since January 2012. The new orders, shipments, unfilled orders, employment and prices series each recovered.

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 Aug Jul Jun Aug'13 2013 2012 2011
General Business Conditions (ISM Adjusted) 53.2 55.5 55.4 51.2 50.0 51.8 51.8
General Business Conditions (Diffusion Index, %) 14.69 25.60 19.28 8.30 3.82 4.29 4.48
 New Orders 14.14 18.77 18.36 1.88 1.13 1.47 4.04
 Shipments 24.59 23.64 14.15 4.00 4.49 11.22 9.47
 Unfilled Orders -7.95 -6.82 -1.08 -6.02 -8.74 -8.83 -5.29
 Delivery Time -5.68 -1.14 1.08 -1.20 -3.52 -0.30 -0.91
 Inventories -14.77 -3.41 9.68 -3.61 -5.73 -2.91 -1.80
 Number of Employees 13.64 17.05 10.75 10.84 3.73 8.62 6.68
 Prices Paid 27.27 25.00 17.20 20.48 21.53 24.71 40.66
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