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Economy in Brief

Philadelphia Fed Business Activity Index Up Slightly
by Tom Moeller April 21, 2006

The Philadelphia Fed Index of General Business Conditions in the manufacturing sector during April rose slightly to 13.2 from an unrevised 12.3 last month. The 0.9 point m/m increase fell somewhat short of Consensus expectations for a rise to 14.8.

During the last ten years there has been a 65% correlation between the level of the Philadelphia Fed Business Conditions Index and three month growth in factory sector industrial production. There has been a 49% correlation with q/q growth in real GDP.

Declines in the sub indexes again were broad based as new orders reversed all of the jump during March and shipments reversed the gains of the prior two months. Moving in the other direction, the index covering the number of employees surged to the highest level (21.7) since late 2004. During the last ten years there has been a 75% 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 prices paid index recovered virtually all of last month's decline. During the last ten years there has been a 76% correlation between the prices paid index and the three month growth in the intermediate goods PPI. There has been an 85% correlation with the change in core intermediate goods prices.

The separate index of expected business conditions in six months recovered nearly all of last month's decline and rose to 28.2, near the highs of the last year. Expectations for employment recovered moderately.

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

Philadelphia Fed Business Outlook April Mar April '05 2005 2004 2003
General Activity Index 13.2 12.3 24.6 12.4 28.0 10.5
Prices Paid Index 29.0 17.2 47.6 43.5 51.2 16.8
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