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Economy in Brief

Philadelphia Fed Business Activity Index Off
by Tom Moeller March 16, 2006

The March Philadelphia Fed Index of General Business Conditions in the manufacturing sector gave back 3.1 points of the 12.1 point improvement last month. The decline to 12.3 compared to Consensus expectations for a lesser decline to 14.

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.

Declines in the sub indexes were broad based although new orders rose sharply to the highest level since October 2004 and shipments rose moderately. Unfilled orders fell sharply as did delivery times. The index covering the number of employees halved and fell to 5.4. 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 and fell to 14.6. Expectations for employment also moved moderately lower.

The prices paid index fell sharply though the index of future prices fell only moderately. 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 latest Business Outlook survey from the Philadelphia Federal Reserve Bank can be found here.

Global Imbalances or Bad Accounting? The Missing Dark Matter in the Wealth of Nations, analysis from the NBER and the Harvard University - John F. Kennedy School of Government is available here.

Philadelphia Fed Business Outlook Mar Feb Mar '05 2005 2004 2003
General Activity Index 12.3 15.4 14.2 12.4 28.0 10.5
Prices Paid Index 17.2 30.5 28.6 43.5 51.2 16.8
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