Impact of the Fed taper: The Treasury International Capital report

Part 3
Impact of the Fed taper: The Treasury International Capital report (Part 3 of 8)

NY Fed’s General Business Conditions Index: An overview

What is the Empire State Manufacturing General Business Conditions Index?

Conducted by the New York Fed, the Empire State Manufacturing General Business Conditions Index is a monthly survey of manufacturers in the New York State across a cross section of industries. The survey questionnaire quizzes participants primarily on: manufacturing activity, new orders, inventories, hiring activity, changes in prices paid for purchases and prices received for sales, and business outlook for the next six months. The base score for the index is zero. Any reading above zero indicates an improving business outlook, whereas a negative score, that is, one that records below zero indicates worsened business conditions.

Part 3Enlarge GraphWhat did February’s reading indicate?

There was moderate expansion in the New York manufacturing activity according to the January 2014 survey. The General Business Conditions Index recorded a month-on-month eight-point decrease to 4.5 after increasing by ten points last month. A 29% of survey respondents reported that conditions had improved over the month, while 25% reported that business conditions had worsened. The new orders index fell 11 points to zero, indicating that orders were flat.

Prices show traction

Both the prices paid and prices received indices showed that there were price increases though input prices were increasing at a declining rate. The prices paid index fell twelve points to 25.0, while the prices received index climbed two points to 15.0, suggesting a faster pace of selling price increases. This is indicative of an inflationary environment. Also when prices expand faster than costs, margins for companies expand which indicates improving profitability ahead.

Employment indexes suggested an improvement in labor market conditions. The index for number of employees fell slightly to 11.3, indicating a modest improvement in the labor market. The average workweek index rose to 3.8, which implied slightly longer work weeks.

Six-Month Outlook Remains Optimistic Indexes for the six-month outlook remained fairly optimistic. The index for future general business conditions increased to 39.0 from 37.5 in January. The index for future new orders climbed 6 points to 45.3, its highest reading in two years. This followed the nine-points increase in January to 39.1. The index for expected number of employees rose to 25.0.

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