Global| Sep 15 2020Empire State Manufacturing Much Stronger than Expected in September
by:Sandy Batten
|in:Economy in Brief
Summary
Economic activity in New York surprised market expectations in September with the Empire State General Business Conditions Index, jumping up to 17.0 from 3.7 in August and almost recouping all its lost ground in August. The Action [...]
Economic activity in New York surprised market expectations in September with the Empire State General Business Conditions Index, jumping up to 17.0 from 3.7 in August and almost recouping all its lost ground in August. The Action Economics Forecast Survey had looked for a modest rise to 5.6. Of respondents, 39.8% reported increased business conditions in September, up from 33.6% in August, while 22.8% reported a decline, down from 29.8% in August. The overall measure is a diffusion index which is constructed by subtracting the percentage decrease from the percentage increase and measures the breadth of change in manufacturing activity across the state.
Haver Analytics calculates an ISM-Adjusted Index which mimics the construction of the purchasing managers' index. This figure rose to 52.5 in September, comfortably above the 50 level which separates expansion from contraction, after having dipped to 49.8 in August.
The underlying indexes in the report uniformly strengthened in September. The new orders index rose to 7.1 from -1.7 in August. The shipments measure rebounded to 14.1 in September from 6.7 in August. Delivery times increased while unfilled orders and inventories continued to decline but at a slower pace than in August.
The employment indicators were also positive. The number of employees index rose to 2.6 in September, its best reading since February, from 2.4 in August. On an even more positive note, the average workweek index jumped up to 6.7 in September, its first positive reading in eight months, from -6.8 in August.
The prices paid index rose again--to 25.2 in September from 16.0 in August, pointing to a pickup in input prices. The prices received index posted another positive reading in September, rising to 6.5 from 4.7 in August, possibly indicating that the disinflationary impact of the lockdowns is waning. The rises in August and September followed four consecutive monthly declines.
Optimism about the future also revived in September with expectations of business conditions in six months rising to 40.3 from 34.3 in August. The rebound was led by improved expectations for both orders and shipments. Of note, expected capital expenditures shot up to 18.7 in September, the highest reading since March, from 6.0 in August.
The Empire State figures are diffusion indexes, which are calculated by subtracting the percentage of respondents reporting declines from the percentage reporting gains. Their values range from -100 to +100. The data are available in Haver's SURVEYS database. The ISM-adjusted headline index dates back to July 2001. The Action Economics Forecasts can be found in Haver's AS1REPNA database.
| Empire State Manufacturing Survey | Sep | Aug | Jul | Sep'19 | 2019 | 2018 | 2017 |
|---|---|---|---|---|---|---|---|
| General Business Conditions (Diffusion Index, %, SA) | 17.0 | 3.7 | 17.2 | 2.2 | 4.8 | 19.7 | 16.1 |
| General Business Conditions Index (ISM Adjusted, >50=Increasing Activity, SA) | 52.5 | 49.8 | 52.6 | 52.4 | 51.8 | 56.4 | 54.6 |
| New Orders | 7.1 | -1.7 | 13.9 | 1.9 | 3.3 | 16.4 | 14.4 |
| Shipments | 14.1 | 6.7 | 18.5 | 5.4 | 10.5 | 20.3 | 15.8 |
| Unfilled Orders | -9.4 | -14.0 | -0.6 | -2.6 | -6.0 | 3.5 | 1.9 |
| Delivery Time | 5.0 | 1.3 | 2.6 | 0.7 | -0.1 | 9.1 | 6.1 |
| Inventories | -3.6 | -10.7 | -9.7 | 8.5 | -0.9 | 5.9 | 1.5 |
| Number of Employees | 2.6 | 2.4 | 0.4 | 7.4 | 5.4 | 12.3 | 8.0 |
| Average Employee Workweek | 6.7 | -6.8 | -2.6 | 3.4 | 2.3 | 7.8 | 4.6 |
| Prices Paid | 25.2 | 16.0 | 14.9 | 29.4 | 26.3 | 45.8 | 29.0 |
| Prices Received | 6.5 | 4.7 | -4.5 | 9.2 | 10.3 | 19.3 | 11.0 |
| Expectations 6 Months Ahead | 40.3 | 34.3 | 38.4 | 15.5 | 23.9 | 35.2 | 42.6 |
Sandy Batten
AuthorMore in Author Profile »Sandy Batten has more than 30 years of experience analyzing industrial economies and financial markets and a wide range of experience across the financial services sector, government, and academia. Before joining Haver Analytics, Sandy was a Vice President and Senior Economist at Citibank; Senior Credit Market Analyst at CDC Investment Management, Managing Director at Bear Stearns, and Executive Director at JPMorgan. In 2008, Sandy was named the most accurate US forecaster by the National Association for Business Economics. He is a member of the New York Forecasters Club, NABE, and the American Economic Association. Prior to his time in the financial services sector, Sandy was a Research Officer at the Federal Reserve Bank of St. Louis, Senior Staff Economist on the President’s Council of Economic Advisors, Deputy Assistant Secretary for Economic Policy at the US Treasury, and Economist at the International Monetary Fund. Sandy has taught economics at St. Louis University, Denison University, and Muskingun College. He has published numerous peer-reviewed articles in a wide range of academic publications. He has a B.A. in economics from the University of Richmond and a M.A. and Ph.D. in economics from The Ohio State University.
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