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Economy in Brief

Philadelphia Fed Activity Index Rebounded
by Tom Moeller October 21, 2004

The Philadelphia Fed’s October index of general business conditions in the manufacturing sector rebounded more than expected to 28.5. The 15.1 point rise versus September exactly matched that month's drop. Consensus expectations had been for a lesser increase to 19.0.

During the last ten years there has been a 71% 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.

Reversing the pattern of the prior month, virtually all of the sub indexes declined. The index for the number of employees fell to the lowest since June.

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

The separate index of expected business conditions in six months dropped sharply for the second consecutive month.

The prices paid index rose to the second highest level since 1988. During the last ten years there has been a 75% 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.

Philadelphia Fed Business Outlook Oct Sept Oct '03 2003 2002 2001
General Activity Index 28.5 13.4 29.2 10.6 7.7 -17.2
Prices Paid Index 57.1 56.4 23.5 16.7 12.2 -0.9
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