What Is the NY Empire State Index?
The term NY Empire State Index refers to the result of a monthly survey of manufacturers in New York state. The survey is conducted by the Federal Reserve Bank of New York. The bank sends out the survey every month to business leaders who represent a wide swath of the manufacturing sector. The headline number for the index refers to the main index of the survey, which summarizes general business conditions in New York state. The index is widely watched for insights into the state and direction of manufacturing in New York state.
- The NY Empire State Index reports on the monthly survey of manufacturers in New York state.
- The survey is conducted by the Federal Reserve Bank of New York and is sent to 200 companies across the state.
- The index is meant to provide a better picture of both the present and the future.
- Survey participants are asked to rate the change for 11 indicators and for “general business conditions."
- The headline number refers to the main index of the survey, which summarizes general business conditions in New York state.
How the NY Empire State Index Works
The NY Empire State Index is the result of a survey taken of manufacturers in and across New York State. Also known as the Empire State Manufacturing Index, the survey is conducted monthly by the Federal Reserve Bank of New York, which began surveying the sector and collecting data in July 2001. The index is based on the responses to a questionnaire sent to various industries in the manufacturing sector across the state, which means one single industry doesn't skew the results.
About 200 of the top manufacturing executives receive the questionnaire out of which about 100 are sent back between the 10th and 15th of each month. The president or chief executive officer (CEO) of each company usually answers the questionnaire. The survey seeks their opinion on the change in several business indicators from the previous month. It also solicits six-month projections for these indicators.
Survey participants are asked to rate the change for each indicator and for what the bank calls general business conditions. They are asked to compare the current month to the one before and to estimate the difference six months out. So the January survey would ask these executives to rate the change for each indicator compared to December. They also evaluate the likely change in six months compared to January.
Although data collection for the NY Empire State Index began in July 2001, the first report wasn't released until April 2002.
The general business conditions section is the main component of the index. It is based on a distinct question posed in the Empire State Manufacturing Survey. The concept of general business conditions is not an average of the other indicators. Instead, these 11 indicators are only applicable to the survey respondents' manufacturing facilities in New York state. They include:
- New orders
- Unfilled orders
- Delivery time
- Prices paid
- Prices received
The options from which executives may choose for each indicator and general business conditions include decrease, no change, or increase.
The general business conditions index and the indexes for the other 11 indicators are calculated by adding the percentage of "increase" responses and then subtracting the percentage of "decrease" responses. If 30% of survey respondents marked "increase," 50% chose "no change," and 20% picked "decrease," then the index would show a reading of 10. Index readings are released as absolute numbers to one place after the decimal point.
The remaining indicators are the number of employees (including contract workers), average employee workweek, technology spending, and capital expenditures. Each index is seasonally adjusted when seasonality is detected.
Benefits of the NY Empire State Index
By using the knowledge of leading executives, the NY Empire State Index provides a better picture of both the present and the future. The general idea is that executives are closer to what is happening in the real economy than policymakers. These business leaders also have access to insider information that they can use to make better assessments of the current conditions in the industry. Finally, executives have years of experience interpreting that information. As such, it follows that their conclusions might be more accurate on some matters.
Example of the NY Empire State Index
According to the June 2022 survey results, there was very little change in business activity from the previous month in New York State. According to the Federal Reserve Bank of New York, the index for general business conditions was -1.2, which was an increase of ten points. There was also an increase in new orders and shipments while unfilled orders dropped for the first time in the last 12 months. Employment indicators in the sector were also positive, pointing to a drop in unemployment who worked more hours during the week. Business optimism, though, remained muted for the remaining six months of 2022.