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Economy in Brief
U.S. Housing Affordability Declines Further in June
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U.S. Producer Prices Fall During July; Core Increase Weakens
The Producer Price Index for Final Demand fell 0.5% during July...
U.S. Unemployment Claims Continue on an Uptrend
Initial claims for unemployment insurance filed in the week ended August 6 rose 14,000 to 262,000...
RICS Survey Points to More U.K. Housing Sector Weakness
The survey of housing market conditions in the U.K. continues to show strength in prices versus weakness...
Viewpoints
Commentaries are the opinions of the author and do not reflect the views of Haver Analytics.
by Tom Moeller July 21, 2005
The July Index of General Business Conditions in the manufacturing sector from the Philadelphia Fed recovered the prior month's drop and returned to positive territory. The 11.8 point m/m increase to 9.6 pulled the index to its highest since April. Consensus expectations had been for a reading of 9.0 in July.
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 50% correlation with q/q growth in real GDP.
Improvement in shipments, unfilled orders and delivery lead times raised the July index. The orders index also did increase but just modestly while the index covering the number of employees fell to 3.4, the lowest since late 2003. During the last ten years there has been a 64% 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 separate index of expected business conditions in six months halved versus June. At 15.3 the index was at its lowest level since early 2001.
The prices paid index rose slightly to 26.5 but remained at half the level of one year ago. During the last ten years there has been a 75% correlation between the prices paid index and the three month growth in the intermediate goods PPI. The correlation with the finished goods PPI has been 50% and with the CPI it's been 43%.
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 | July | June | July '04 | 2004 | 2003 | 2002 |
---|---|---|---|---|---|---|
General Activity Index | 9.6 | -2.2 | 35.5 | 28.1 | 10.6 | 7.7 |
Prices Paid Index | 26.5 | 23.5 | 50.2 | 51.3 | 16.8 | 12.3 |