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Economy in Brief

Philadelphia Fed Index Down Again
by Tom Moeller April 17, 2008

The Philadelphia Federal Reserve Bank reported that its April Index of General Business Conditions in the manufacturing sector fell to -24.9% and reversed all of the prior month's modest improvement. The latest level was the lowest since the recession year 2001.

The Philadelphia Fed constructs a diffusion index for total business activity and each of the sub indexes. The business conditions index reflects a separate survey question, not the sub indexes listed below.

During the last ten years there has been a 59% correlation between the level of the Philadelphia Fed Business Conditions Index and the three-month growth in factory sector industrial production. There has been a 42% correlation with q/q growth in real GDP.

Sharp declines in the new orders, employment and in the inventories sub indexes were registered while shipments fell modestly.

The prices paid index backed off slightly after rising in March to its highest level since January 2005. 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 rose sharply and was at the highest level since November; positive for the first month in the last three. Expectations for new orders rose sharply

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

The Changing Business of Banking: Implications for Financial Stability and Lessons from Recent Market Turmoil is today's speech by Federal Reserve Vice Chairman Donald L. Cohn and it is available here.

The Economic Logic of a Fresh Start, which examines personal bankruptcy filings, from the Federal Reserve Bank of Philadelphia can be found here.

Philadelphia Fed (%) April March April '07 2007 2006 2005
General Activity Index -24.9 -17.4 -0.8 5.1 8.1 11.5
Prices Paid Index 51.6  54.4  27.6 26.4 36.6 40.1
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