·
The Philadelphia Federal Reserve Bank's Index of General Business
Conditions in the manufacturing sector fell and was negative for the
third month in the last four. The December reading of -4.3 was the
lowest since early 2003 and compared to Consensus expectations for just
a slight decline to +3.5.
· During the last ten years there has been a 65% correlation between the level of the Philadelphia Fed Business Conditions Index and three month growth in factory sector industrial production. There has been a 43% correlation with q/q growth in real GDP.
· The sub indexes for unfilled orders,
delivery times and inventories accounted for much of the total's
decline. New orders improved to a less negative reading and shipments
surged. The employment index also improved. During the last ten years
there has been a 75% correlation between the employment index and the
three month growth in factory payrolls.
· The business conditions index reflects a separate survey question, not the sub indexes.
· The prices paid index fell to the lowest level since March. During the last ten years there has been a 76% correlation between the prices paid index and the three month growth in the intermediate goods PPI. There has been an 85% correlation with the change in core intermediate goods prices.
· The separate index of expected business conditions in six months nearly halved m/m and fell to the lowest level since August.
· The latest Business Outlook survey from the Philadelphia Federal Reserve Bank can be found here.