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Economy in Brief

Empire State Factory Sector Activity Index Reverses Earlier Improvement
by Tom Moeller  May 16, 2016

The Empire State Factory Index of General Business Conditions indicated deterioration in business activity during May. The New York index declined to -9.02 following unrevised positive readings in the prior two months. Nineteen percent of respondents reported a higher level of business activity while 28% reported a decrease. Expectations had been for 7.3 in the Action Economics Forecast Survey. The data are reported by the Federal Reserve Bank of New York and reflect business conditions in New York, northern New Jersey and southern Connecticut.

Based on these figures, Haver Analytics calculates a seasonally adjusted index that is comparable to the ISM series. The adjusted figure declined to 48.1 from 51.9, and also indicated that business activity deteriorated this month. Since inception in 2001, the business conditions index has had a 65% correlation with the change in real GDP.

Deterioration in the component series was broad-based. The new orders reading declined -5.54 following two months above break-even. Shipments also returned to negative territory, indicating that shipments levels fell, while delivery times shortened. The level of unfilled orders declined at the quickest pace in three months. Inventory decumulation continued at a fairly steady pace. Running counter to these indications was the employment figure which rose to 2.08. It was the highest level since July, and suggested positive job growth for a second straight month. During the last ten years there has been a 69% correlation between the index level and the m/m change in factory sector payrolls. The workweek index declined to the lowest level this year.

The prices paid index declined to 16.67, but remained near its highest level since early last year. It remained down, however, from the 2011 high of 69.89. Twenty two percent of respondents paid higher prices while 5% paid less. The index of prices received fell back into negative territory, where it has been for three months this year.

The index of expectations for business conditions in six months eased to 28.48, but remained up sharply from the expansion low of 9.51 three months ago. Broad-based deterioration in the component series was accompanied by a slight rise in expected prices paid. Expected capital expenditures fell sharply along with 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 May Apr Mar May'15 2015 2014 2013
General Business Conditions Index (ISM Adjusted, >50=Increasing Activity, SA) 48.1 51.9 51.1 51.7 48.9 52.4 50.0
General Business Conditions (Diffusion Index, %, SA) -9.02 9.56 0.62 2.22 -2.34 11.89 3.88
  New Orders -5.54 11.14 9.57 1.52 -5.62 7.91 1.15
  Shipments -1.94 10.17 13.88 12.99 3.97 12.09 4.55
  Unfilled Orders -6.25 -0.96 -3.96 -11.46 -10.52 -9.03 -8.74
  Delivery Time -6.25 0.96 -3.96 -10.42 -5.32 -5.17 -3.52
  Inventories -7.29 -4.81 -6.93 7.29 -7.06 -1.80 -5.73
  Number of Employees 2.08 1.92 -1.98 5.21 2.72 10.85 3.73
  Prices Paid 16.67 19.23 2.97 9.38 8.84 20.90 21.53
Expectations 6 Months Ahead 28.48 29.40 25.52 30.50 30.38 40.22 33.25
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