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Economy in Brief

Empire State Factory Sector Index Declines
by Tom Moeller  November 15, 2017

The Empire State Manufacturing Index of General Business Conditions for November fell to 19.4 following its unrevised improvement to 30.2 during October. The latest level was the lowest since July, but continued to indicate expansion in factory sector activity. It fell short of expectations for 25.4 in the Action Economics Forecast Survey. 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 eased to 55.3 from 55.6, but remained near its recent high. During the last ten years, the index posted a 63% correlation with the change in real GDP.

Most of the component series deteriorated m/m. The shipments series fell sharply to a three-month low while unfilled orders also fell. The delivery times index declined and indicated the quickest deliveries since January. Moving higher were the new orders and inventories series, both up sharply from the 2015 and 2016 lows.

The employment index slipped from its three-year high, yet was up sharply versus a negative reading averaged in 2016. During the last ten years, there has been a 69% correlation between the employment index and the m/m change in factory sector payrolls. Twenty-four percent of respondents reported a higher payroll level while twelve percent reported a decline. The employee workweek reading declined to the lowest level since January, off sharply versus its March high.

The prices paid series fell to the lowest level since July. It nevertheless remained up sharply versus its 2015 low. Twenty-nine percent of respondents indicated paying higher prices, while four percent reported them lower. The prices received index rose slightly, but has trended sideways this year.

Expectations of business conditions six months ahead surged to a twelve-month high, reflecting sharply higher readings for new and unfilled orders, shipments and employment. Expected prices paid also strengthened.

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 Nov Oct Sep Nov'16 2016 2015 2014
General Business Conditions (Diffusion Index, %, SA) 19.4 30.2 24.4 2.2 -2.5 -2.3 11.9
General Business Conditions Index (ISM Adjusted, >50=Increasing Activity, SA) 55.3 55.6 57.3 47.3 48.2 48.9 52.4
  New Orders 20.7 18.0 24.9 4.0 -0.7 -5.6 7.9
  Shipments 18.4 27.5 16.2 8.6 1.8 4.0 12.1
  Unfilled Orders -4.6 2.3 8.9 -12.7 -8.8 -10.5 -9.0
  Delivery Time -2.3 3.1 14.6 -5.5 -4.8 -5.3 -5.2
  Inventories 4.6 -7.8 6.5 -23.6 -9.6 -7.1 -1.8
  Number of Employees 11.5 15.6 10.6 -10.9 -5.0 2.7 10.9
  Average Employee Workweek -0.8 0.0 5.7 -10.9 -5.4 -5.3 1.4
  Prices Paid 24.6 27.3 35.8 15.5 15.7 8.8 20.9
Expectations 6 Months Ahead 49.9 44.8 39.3 31.1 29.0 30.3 40.2
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