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The August 2014 Empire State Manufacturing Survey indicates that business conditions continued to improve for New York manufacturers, but the improvement was less widespread than in the previous month. The headline general business conditions index retreated eleven points to 14.7, after reaching a four-year high in July. The new orders index slipped almost five points to 14.1, while the shipments index edged up a point to 24.6—a multiyear high. The unfilled orders index inched down one point to -8.0. The indexes for both prices paid and prices received were up slightly, indicating a marginal pickup in the pace of price increases. Labor market conditions were mixed, with the employment index declining slightly but the index for hours worked rising modestly. Most of the indexes for the six-month outlook rebounded sharply, after slipping in the July survey; a number of them reached multiyear highs, signaling increasingly widespread optimism about the near-term outlook.
General Business Conditions Index Retreats from Four-Year High
Business conditions improved for a fourth consecutive month for New York manufacturers, although the improvement was less widespread than last month’s, according to the August 2014 survey. The general business conditions index retreated eleven points to 14.7, after climbing to a four-year high in July. Thirty-one percent of respondents reported that conditions had improved over the month, while 17 percent reported that they had worsened. The new orders index slipped nearly five points to 14.1, but the shipments index edged up one point to 24.6—its highest level since March 2010. The unfilled orders index eased back to -8.0, pointing to a slow but steady lessening in backlogs. The delivery time index fell five points to -5.7, and the inventories index fell another 11 points to -14.8, pointing to a noteworthy drawdown of inventories.
Mixed News on Employment
Both price indexes edged up this month, suggesting a marginal pickup in the pace of price increases. The prices paid index rose two points to 27.3, and the prices received index inched up one point to 8.0. Labor market conditions were mixed but continued to improve overall. The index for number of employees slipped three points to 13.6, suggesting a slight pullback in the pace of hiring. However, the average workweek index rose six points to 8.0, signaling a slight increase in hours worked.
Increasingly Widespread Optimism
Despite the pullback in most of the survey’s indexes for current conditions, optimism about the near-term outlook grew increasingly widespread. The index for future general business conditions climbed eighteen points to 46.8—its highest level in two-and-a-half years. The future new orders index surged twenty-five points to 50.4, and the future shipments index soared thirty points to 54.5. The index for expected number of employees rose six points to 22.7, and the future average workweek index edged up to zero. The capital expenditures index jumped nine points to 18.2, and the technology spending index inched up to 12.5.
Participants from across the state in
a variety of industries respond to a questionnaire and
report the change in a variety of indicators from the
previous month. Respondents also state the likely direction
of these same indicators six months ahead. April 2002
is the first report, although survey data date back
to July 2001.
The survey is sent on the first day of each month to
the same pool of about 200 manufacturing executives
in New York State, typically the president or CEO. About
100 responses are received. Most are completed by the
tenth, although surveys are accepted until the fifteenth.
Respondents come from a wide range of industries from
across the New York State. No one industry dominates
the respondent pool.
The survey's main index, general business conditions, is not a weighted average of other indicators—it is a distinct question posed on the survey.
Each index is seasonally adjusted when stable seasonality is detected.
Each January, all data undergo a benchmark revision
to reflect new seasonal factors.
The Empire State Manufacturing Survey seasonally adjusts data based on the Census X-12 additive procedure utilizing a logistic transformation.
The "increase" and "decrease" percentage
components of the diffusion indexes are each tested
for seasonality separately and adjusted accordingly
if such patterns exist. If no seasonality is detected,
the component is left unadjusted. The "no change"
component contains the residual, computed by subtracting
the (adjusted) increase and decrease from 100. Seasonal
factors are forecast in December for the upcoming year.
Data are adjusted using a logistic transformation.
The not-seasonally adjusted series, expressed in decimal
form (referred to as "p"), is transformed
using the following equation:
X = log(p/(1-p))
The seasonal factor is then subtracted from X:
adjX = X - seasonal factor
The result is then transformed using the following
SA Series = exponential(adjX)/(1+exponential(adjX))