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Economy in Brief

Philadelphia Fed Activity Index Improved
by Tom Moeller December 16, 2004

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.

Philadelphia Fed Business Outlook Dec Nov Dec '03 2004 2003 2002
General Activity Index 29.6 20.7 30.3 27.5 10.6 7.7
Prices Paid Index 52.2 53.9 30.9 51.2 16.7 12.2
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