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Economy in Brief

Empire State Factory Sector Activity Index Deteriorates
by Tom Moeller  July 15, 2016

The Empire State Factory Index of General Business Conditions declined during July to 0.55 and reversed much of its June improvement. Expectations had been for 5.0 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 48.9 from 50.3. Since inception in 2001, the business conditions index has had a 64% correlation with the change in real GDP.

A weaker new orders reading accounted for much of the decline in the overall index as it fell to -1.82 from 10.90. Shipments also declined to 0.70 from 9.32. Unfilled orders fell to -12.09 from -10.20 and employment moved lower to -4.40 from 0.00. During the last ten years there has been a 68% correlation between the index level and the m/m change in factory sector payrolls. The workweek figure also deteriorated slightly. To the upside, the inventory index showed a lesser rate of decumulation and delivery times shortened.

The prices paid index increased to 18.68, the highest level since April of last year. It remained down, however, from the 2011 high of 69.89. Twenty-three percent of respondents paid higher prices while four percent paid less. The index of prices received improved slightly.

The index of expectations for business conditions in six months declined to 29.24 but remained up sharply versus the expansion low of 9.51 in January. Changes in the component series were modest m/m, except that employment declined sharply, but technology spending improved significantly.

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 Jul Jun May Jul'15 2015 2014 2013
General Business Conditions Index (ISM Adjusted, >50=Increasing Activity, SA) 48.9 50.3 48.1 49.5 48.9 52.4 50.0
General Business Conditions (Diffusion Index, %, SA) 0.55 6.01 -9.02 0.94 -2.34 11.89 3.88
  New Orders -1.82 10.90 -5.54 -5.18 -5.62 7.91 1.15
  Shipments 0.70 9.32 -1.94 5.22 3.97 12.09 4.55
  Unfilled Orders -12.09 -10.20 -6.25 -7.45 -10.52 -9.03 -8.74
  Delivery Time 3.30 -2.04 -6.25 0.00 -5.32 -5.17 -3.52
  Inventories -8.79 -15.31 -7.29 -8.51 -7.06 -1.80 -5.73
  Number of Employees -4.40 0.00 2.08 3.19 2.72 10.85 3.73
  Prices Paid 18.68 18.37 16.67 7.45 8.84 20.90 21.53
Expectations 6 Months Ahead 29.24 34.84 28.48 27.87 30.38 40.22 33.25
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