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Economy in Brief

Empire State Business Conditions Index Weakens; Prices Improve
by Tom Moeller  April 17, 2017

The Empire State Manufacturing Index of General Business Conditions for April fell to 5.2 from 16.4 in March. It was the weakest reading since November. The Action Economics Forecast Survey expected 15.0. These data, reported by the Federal Reserve Bank of New York, 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 improved to 55.5 from 54.9. It was the highest level since May 2012. During the last ten years, the index posted a 63% correlation with the change in real GDP.

A decline in the new orders component led the weakness in last month's component series. It was the softest reading in three months. The unfilled orders and employee workweek readings also declined. Working the other way were the shipments, delivery times and inventory series. The employment index jumped to its highest level since March 2015. During the last ten years, there has been a 69% correlation between the employment index and the m/m change in factory sector payrolls.

The prices paid series also strengthened modestly m/m and remained up sharply versus its low in October 2015. An improved 36.5% of respondents reported paying higher prices, while an increased 3.6% reported them lower. The prices received index similarly rose to 12.4 and regained just part of its March decline.

Expectations of business conditions six months ahead remained well below the January peak. The new orders and shipments series fell, but other component indexes increased, notably inventories. Expected prices paid fell to a six month low. The capital expenditure index rose to its highest level since February 2016 and technology spending index also increased.

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 Apr Mar Feb Apr'16 2016 2015 2014
General Business Conditions (Diffusion Index, %, SA) 5.2 16.4 18.7 8.4 -2.5 -2.3 11.9
General Business Conditions Index (ISM Adjusted, >50=Increasing Activity, SA) 55.5 54.9 54.4 51.3 48.2 48.9 52.4
  New Orders 7.0 21.3 13.5 7.9 -0.7 -5.6 7.9
  Shipments 13.7 11.3 18.2 6.8 1.8 4.0 12.1
  Unfilled Orders 12.4 14.2 8.2 -1.0 -8.8 -10.5 -9.0
  Delivery Time 16.1 10.6 7.1 1.0 -4.8 -5.3 -5.2
  Inventories 3.6 -2.7 3.1 -4.8 -9.6 -7.1 -1.8
  Number of Employees 13.9 8.8 2.0 1.9 -5.0 2.7 10.9
  Average Employee Workweek 8.8 15.0 4.1 1.9 -5.4 -5.3 1.4s
  Prices Paid 32.8 31.0 37.8 19.2 15.7 8.8 20.9
Expectations 6 Months Ahead 39.9 37.4 41.7 28.9 29.0 30.3 40.2
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