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Economy in Brief

Empire State Survey Signals a Brighter Business Outlook
by Peter D'Antonio  December 15, 2016

The Empire State Manufacturing Index of General Business Conditions for December continued to improve, rising to 9.0 (up from 1.5 in November), which was its highest reading since April. According to the Action Economics Forecast Survey, markets had expected a smaller increase to 3.0. These data, reported by the Federal Reserve Bank of New York, reflect business conditions in New York, northern New Jersey and southern Connecticut.

According to the survey, new orders have made a huge turn in the past two months, rising a total of 17 points to a December reading of 11.4. The latest reading was the highest since mid-2014, suggesting continued gains in business activity. Shipments also were solid, remaining at 8.5. Other indicators of current conditions, however, were not so positive. Inventories and order backlogs fell and delivery times slowed. Also, labor market conditions in the region remained soft.

Based on these index components, Haver Analytics calculates a seasonally adjusted index that is comparable to other business surveys. The Empire ISM-adjusted index shows that business in the New York area has been relatively soft in recent months, but improving. The index increased for the third straight month to relatively low 48.6 in December.

The best news in this report was the sharp upswing in the six-month outlook, suggesting that regional businesses have recently become very optimistic. The Empire future business conditions index surged by 20 points to 50.2, which was the biggest gain and the highest reading in five years. 61 percent of businesses anticipate better conditions in coming months. Notably, the indexes for future orders, shipments and capital spending were strong. Also, expectations for the labor market were healthy, in contrast to the soft current labor market assessment.

The Empire State figures are diffusion indexes, which are calculated by subtracting the percent of respondents reporting declines from those reporting gains. The data are available in Haver's SURVEYS database. The ISM-adjusted headline index dates back to 2001. The Action Economics Forecasts can be found in Haver's AS1REPNA database.

Empire State Manufacturing Survey Dec Nov Oct Dec'15 2015 2014 2013
General Business Conditions (Diffusion Index, %, SA) 9.0 1.5 -6.8 -6.2 -2.4 11.9 3.9
General Business Conditions Index (ISM Adjusted, >50=Increasing Activity, SA) 48.6 47.2 46.5 46.2 48.9 52.4 50.0
  New Orders 11.4 3.1 -5.6 -6.2 -5.6 7.9 1.2
  Shipments 8.5 8.5 -0.6 4.6 4.0 12.1 4.5
  Unfilled Orders -10.4 -12.7 -10.4 -16.2 -10.5 -9.0 -8.7
  Delivery Time -7.8 -5.5 -11.3 -8.1 -5.3 -5.2 -3.5
  Inventories -13.9 -23.6 -12.3 -12.1 -7.1 -1.8 -5.7
  Number of Employees -12.2 -10.9 -4.7 -16.2 2.7 10.9 3.7
  Prices Paid 22.6 15.5 22.6 4.0 8.8 20.9 21.5
Expectations 6 Months Ahead 50.2 29.9 36.0 35.6 30.4 40.2 33.2
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