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Economy in Brief

Empire State Factory Sector Index Declines Sharply
by Tom Moeller  August 17, 2015

The Empire State Factory Index of General Business Conditions deteriorated this month to its lowest level since the recession. The latest figure dropped to -14.92 from an unrevised 3.86 in July. It was the lowest level since April 2009. The latest disappointed expectations for 4.4 in the Action Economics Forecast Survey. The figures are reported by the Federal Reserve of New York.

Based on these figures, Haver Analytics calculates a seasonally adjusted index that is compatible to the ISM series. The adjusted figure fell sharply to 45.0, also a six-year low. A rising level of activity is indicated by a figure above 50. Since inception in 2001, the business conditions index has had a 62% correlation with the change in real GDP.

Declines in the component series were broad-based this month, but most pronounced in inventories, new orders and shipments. Unfilled orders, delivery times and the average workweek also posted negative readings. The number of employees remained positive, but it was at the lowest level since December 2013. During the last ten years there has been a 72% correlation between the employment series and the m/m change in factory sector payrolls.

The prices paid index eased to 7.27, the lowest point since May 2009. Eighteen percent of respondents reported higher prices but a sharply increased 11 percent paid less, the most since July 2009. Prices received also deteriorated modestly.

Despite the weakening of current business conditions, a sharply increased 42.7% of respondents expected improvement, near the high end of this year's range. Each of the component series exhibited m/m gain except prices paid 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 dates back to 2001. The Action Economics figure can be found in Haver's AS1REPNA database.

Empire State Manufacturing Survey Aug Jul Jun Aug'14 2014 2013 2012
General Business Conditions Index (ISM Adjusted, >50=Increasing Activity, SA) 45.0 49.9 51.9 52.9 52.4 50.0 51.8
General Business Conditions (Diffusion Index, %, SA) -14.92 3.86 -1.98 15.10 11.83 3.87 4.22
 New Orders -15.70 -3.50 -2.12 14.24 7.89 1.16 1.46
 Shipments -13.79 7.88 12.01 21.93 12.09 4.52 11.20
 Unfilled Orders -4.55 -7.45 -4.81 -7.95 -9.03 -8.74 -8.83
 Delivery Time -4.55 0.00 -1.92 -5.68 -5.17 -3.52 -0.30
 Inventories -17.27 -8.51 1.92 -14.77 -1.80 -5.73 -2.91
 Number of Employees 1.82 3.19 8.65 13.64 10.85 3.73 8.62
 Prices Paid 7.27 7.45 9.62 27.27 20.90 21.53 24.71
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