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Economy in Brief

Philadelphia Fed Index Remains Somewhat Weak
by Tom Moeller July 16, 2009

The Philadelphia Federal Reserve Bank indicated that, during July, factory sector activity in the region continued to contract. The rate of decline even quickened versus June as indicated by the Index of General Activity in the manufacturing sector at -7.5 versus -2.2. However, both figures were materially improved from the lows of this past winter. Consensus expectations had been for a July reading of -5.0.

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

Amongst the components, both the shipments and employment indexes turned lower month-to-month but remained up from the March-April lows. 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 new orders, unfilled orders and average workweek components each improved to new highs.

The prices paid index also improved to a less-negative 3.5. 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 also slipped during July after having improved to its highest level since 2003. Most of the index components fell except that expectations for prices paid, employment and inventories rose to new cycle highs.

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

Residential Housing and Personal Bankruptcy from the Federal Reserve Bank of Philadelphia can be found here.

Philadelphia Fed (%) July June July '08 2008 2007 2006
General Activity Index -7.5 -2.2 -16.7 -21.3 5.0 8.0
Prices Paid Index -3.5  -13.0  71.3 36.4 26.3 36.7
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