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Economy in Brief

Philadelphia Fed Index Moderates, But Still Strong Historically
by Carol Stone August 19, 2004

The Philadelphia Fed’s index of general business conditions in the manufacturing sector moderated in the August survey, falling to 28.5 from 36.1 in July. The 8.2-point decrease was weaker than Consensus expectations for a marginal decline to 34.5.

Every one of the sub-indexes had a lower reading in August than in July, particularly new and unfilled orders; delivery times had a net negative index of -6.8.

The business conditions index reflects a separate survey question, not a weighted combination of the sub-indexes. Moreover, the August value at 28.5 is "weak" only relative to some prior months this year. The performance so far this year, which averages 30.5 in the first eight months, is among the highest recorded in the survey's 36-year history. In the accompanying graph, a horizontal line at that average shows how few occasions the survey has been able to sustain higher readings for more than a few months.

Further, the separate index of business conditions expected in six months turned upward sharply from 36.3 in July to 52.7 for this month.

The prices paid index rebounded after July's moderation. No details are collected on the source of price changes, but we'd guess that energy costs are a major culprit. 54.7% of respondents reported increases in prices paid and only 1% experienced decreases. More companies than that had seen prices rise in earlier months this year, but this is the smallest number garnering price decreases in nearly four years.

The Philadelphia Fed index is based on a survey of 250 regional manufacturing firms, but these firms sell nationally and internationally. The data are carried in Haver's "SURVEYS" database, along with an extensive collection of similar surveys by other Federal Reserve Banks.

The latest Business Outlook survey from the Philadelphia Federal Reserve Bank can be found here.

Philadelphia Fed Business Outlook Aug July June Aug '03 2003 2002 2001
General Activity Index 28.5 36.1 28.9 21.9 10.6 7.7 -17.2
Prices Paid Index 53.7 46.3 51.9 14.4 16.7 12.2 -0.9
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