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Economy in Brief

PPI Jumped Again in May
by Tom Moeller June 17, 2004

Finished producer prices rose somewhat more than expected last month, up 0.8% versus Consensus expectations for a 0.6% gain. The rise followed a 0.7% jump in April and pulled the y/y change to 4.9%, its highest since 1990.

Strength in energy prices, up 4.0% (15.0% y/y), and food prices, up 1.8% (7.4% y/y), again powered the PPI. In addition, prices less food & energy rose 0.3%, more than Consensus expectations for a 0.2% gain.

Prices of finished consumer goods less food & energy rose a firm 0.4% (1.8% y/y) and are up at a 2.6% annual rate since December. Consumer durable prices jumped 0.7% (+1.8% y/y) but core non-durable prices inflation eased to 0.2% (+1.7% y/y).

Finished capital goods prices rose 0.3% (1.5% y/y).

Intermediate goods prices were strong showing a 1.1% rise last month. Core intermediate prices also were firm, up 0.9% (5.1% y/y). Plywood prices continued earlier months' strength (54.3% y/y) as did softwood lumber (39.1% y/y). Steel (31.0% y/y) & aluminum (5.8% y/y) prices also were strong.

Crude goods prices were strong again due to higher energy prices, up 5.8% (16.9% y/y) and higher food prices, up 3.2% (28.1% y/y). Core crude prices fell for the second consecutive month reflecting recent weakness in commodity prices.

Producer Price Index May April Y/Y 2003 2002 2001
Finished Goods 0.8% 0.7% 4.9% 3.2% -1.3% 2.0%
  Core 0.3% 0.2% 1.7% 0.2% 0.1% 1.4%
Intermediate Goods 1.1% 1.4% 7.1% 4.7% -1.5% 0.4%
  Core 0.9% 1.1% 5.1% 2.0% -0.5% -0.1%
Crude Goods 2.8% 3.0% 22.0% 25.1% -10.6% 0.3%
  Core -3.8% -3.9% 21.6% 12.4% 3.8% -10.0%
Initial Claims for Unemployment Insurance Down
by Tom Moeller June 17, 2004

Initial claims for jobless insurance fell 15,000 last week to 336,000. The prior week's level was little revised. Consensus expectations had been for 345,000 claims.

The latest figure is for the June survey period of nonfarm payrolls and initial claims were down 11,000 (3.2%) from the May period.

The 4-week moving average of initial claims fell to 343,250 (-19.2% y/y).

Continuing claims for unemployment insurance rose 31,000 following a 123,000 decline the prior week which was deeper than initially reported.

The insured rate of unemployment was stable at 2.3% versus 2.8% for all of last year.

"Employment Surveys Are Telling the Same (Sad) Story" from the Federal Reserve Bank of Cleveland can be found here.

Unemployment Insurance (000s) 6/12/04 6/05/04 Y/Y 2003 2002 2001
Initial Claims    336 351 -20.2% 403 404 406
Continuing Claims    -- 2,895 -21.0% 3,533 3,573 3,023
Leading Indicators Signal Further Growth
by Tom Moeller June 17, 2004

The Composite Index of Leading Economic Indicators reported by the Conference Board signaled continued US economic growth by rising a slightly more than expected 0.5% in May. The current uptrend in the leaders began April of last year.

Recent firming of the leaders' uptrend was led last month by gains in 80% of the component series. Over a six-month span 90% of the leaders' components have risen. During the last ten years there has been a 62% correlation between the six-month diffusion index of the leaders and quarterly growth in real GDP.

Longer manufacturing hours, a higher money supply and a steeper yield curve had the largest positive influences on the leaders in May, offset somewhat by lower stock prices and lower consumer expectations.

The leading index is based on eight previously reported economic data series and two that are estimated.

The coincident indicators rose the same 0.3% as in April and all of the component series were higher over one and six month spans.

The ratio of coincident-to-lagging indicators rose 0.3% to another record level. The ratio is an indicator of excess relative to actual economic performance.

Visit the Conference Board's site for coverage of leading indicator series from around the world.

Business Cycle Indicators May April Y/Y 2003 2002 2001
Leading 0.5% 0.1% 4.4% 1.3% 2.2% -0.8%
Coincident 0.3% 0.3% 2.9% 0.4% -0.5% -0.5%
Lagging 0.1% 0.1% -2.6% -2.2% -2.8% -1.4%
Philadelphia Fed Index Firmed
by Tom Moeller June 17, 2004

The Philadelphia Fed’s June index of general business conditions in the manufacturing sector improved to 28.9. The 5.1 point increase versus May was greater than Consensus expectations for a rise to 25.0.

During the last twenty years there has been a 58% correlation between the level of the Philadelphia Fed Business Conditions Index and quarterly growth in real GDP. The correlation with quarterly growth in factory sector industrial production has been 74%.

The separate index of expected business conditions in six months fell moderately to 39.5 versus 42.3 in May and 50.5 during all of last year.

Most of the sub indexes improved m/m except employment and delivery times.

The business conditions index reflects a separate survey question, not the sub indexes.

The prices paid index reversed all of the increase in May.

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.

Philadelphia Fed Business Outlook June May June '03 2003 2002 2001
General Activity Index 28.9 23.8 2.2 10.6 7.7 -17.2
Prices Paid Index 51.9 59.6 5.4 16.7 12.2 -0.9
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