·
The Philadelphia Fed’s index of general
business conditions in the manufacturing sector improved in December to
29.6 from 20.7 the prior month. Only a slight rise to 21.1 had been the
Consensus expectation.
· During the last ten years there has been a 68% correlation between the level of the Philadelphia Fed Business Conditions Index and three month growth in factory sector industrial production. There has been a 53% correlation with q/q growth in real GDP.
· Each of the sub indexes improved m/m with the exception of the index for inventories as well as for the number of employees.
· The business conditions index reflects a separate survey question, not the sub indexes.
· The separate index of expected business conditions in six months reversed about half of the sharp improvement in November and fell to 41.2.
·
The prices paid index fell for the second month, to 52.2, although
expectations for prices surged. During the last ten years there has been
a 76% correlation between the prices paid index and the three month
growth in the PPI for intermediate goods. The correlation with the
finished goods PPI has been 41% and with the CPI it's been 45%.
· The Philadelphia Fed index is based on a survey of 250 regional manufacturing firms, but these firms sell nationally and internationally.
· The latest Business Outlook survey from the Philadelphia Federal Reserve Bank can be found here.