DEFINITION of 'NY Empire State Index'
An index based on the monthly survey of manufacturers in New York State – known as the Empire State Manufacturing Survey – conducted by the Federal Reserve Bank of New York. The headline number for the NY Empire State Index refers to the survey’s main index, which summarizes general business conditions in New York State.
The index is based on survey responses to a questionnaire sent out on the first day of each month to an unchanged pool of about 200 top manufacturing executives, generally the president or CEO. The questionnaire seeks their opinion on the change in a number of business indicators from the previous month, and also the likely direction of these indicators six months into the future. Also known as the Empire State Manufacturing Index.
BREAKING DOWN 'NY Empire State Index'
The “general business conditions” component of the index is based on a distinct question posed on the Empire State Manufacturing Survey, and is not a weighted average of the other indicators. These 11 indicators, which are only applicable to the survey respondents' manufacturing facilities in New York State, include the following – new orders, shipments, unfilled orders, delivery time, inventories, prices paid, prices received, number of employees including contract workers, average employee work week, technology spending and capital expenditures. Each index is seasonally adjusted when seasonality is detected.
Survey participants are asked to rate the change for each indicator, for “general business conditions” in the previous month compared to the month before, and for six months out. For example, the January survey would ask these executives to rate the change for each indicator compared to December (i.e. “Decrease”, “No change” or “Increase”), and also rate the likely change in six months compared to January.
The general business conditions index and the sub-indexes for the other 11 indicators are diffusion indexes calculated by subtracting the percentage of respondents who rate an indicator as “lower”, i.e. a decrease, from those who rate it as "higher”, i.e. an increase. As an example, if 30% of survey respondents thought business conditions had improved in the current month, 50% believed there was no change, and 21% rated conditions as having worsened, the index would show a reading of 9. Index readings are released as absolute numbers (not as percentages) to one place after the decimal.
The index is widely watched by professionals and investors for insights on the state and direction of manufacturing in the influential New York State region.