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Economy in Brief

Philadelphia Fed Index Improves Sharply
by Tom Moeller June 18, 2009

The Philadelphia Federal Reserve Bank indicated that factory sector activity in the region contracted during June but at the slowest rate since a slight advance during September of last year. The Index of General Activity in the manufacturing sector came in at -2.2 versus Consensus expectations for a reading of -17.0. The This index reflects a question separate from the components which are surveyed separately.

During the last ten years there has been a 77% 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 70% correlation with q/q growth in real GDP.

Amongst the sub-indexes shipments turned positive for the first time since May of last year. The new orders, inventory and employment indexes each rose sharply but were still negative. A reduced thirty-one percent of respondents expected to lower employment levels and an improved ten percent expected to raise them. During the last ten years there has been a 79% correlation between the index level and the m/m change in manufacturing sector payrolls.

The prices paid index rose to a less-negative 13.0. Only five percent of respondents planned to raise prices while eighteen percent expected to lower them. During the last ten years there has been a 74% correlation between the prices paid index and the three-month growth in the intermediate goods PPI. There has been an 83% correlation with the change in core intermediate goods prices.

The separate index of expected business conditions in six months improved to its highest level since 2003. The expectations index for new orders, shipments and employment each were up sharply from their winter lows. Expectations for prices also are sharply improved during the last six months

The figures from the Philadelphia Federal Reserve can be found in Haver's SURVEYS database.

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

Residential Housing and Personal Bankruptcy from the Federal Reserve Bank of Philadelphia is available here.

Philadelphia Fed (%) June May June '08 2008 2007 2006
General Activity Index -2.2 -22.6 -17.7 -21.3 5.0 8.0
Prices Paid Index -13.0  -22.8  63.4 36.4 26.3 36.7
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