Monday, December 17, 2012

Measurement without Theory on the Empire State Manufacturing Survey

Corrections examines today's Empire State Manufacturing Survey:  the release contains 88 variables:, current and future estimates of New York manufacturers for: business conditions, orders, future shipments, delivery time, inventories, unfulfilled orders, prices paid, prices received  number of employees, and average employee workweek, along with future capital expenditures and future technology spending.

Corrections takes each series, normalizes it, HP filters it, multiplies it by -1 if it correlates negatively with the average of all series together (so variables that are high when conditions are bad flip sign), and finally sorts the series vertically based on the value in July 2009.  We then graph the series in a heat map:  red when the normalized, filtered, and signed variable is "high" and blue when it is "cold."

The result is blind economics (click to enlarge), without theory, seeing if these variables are telling us anything related to one another, suggesting they're measuring something.

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