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Economy in Brief

Philadelphia Fed Index Increases As New Orders & Prices Rise
by Tom Moeller April 15,2010

Forward momentum in the economy gained steam this month according to the Philadelphia Federal Reserve Bank. It indicated that its April index of regional factory sector activity rose for the third consecutive month to the second highest level since early-2005. At 20.2 the index matched Consensus expectations and has been positive since the summer. The latest figure compared to those near -40.0 this past fall and winter.

During the last ten years there has been a 75% 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 73% correlation with q/q growth in real GDP. The latest survey from the Philadelphia Federal Reserve Bank can be found here.

Improvement in inventory accumulation was behind much of the April index gain. It was accompanied by higher new orders and improved unfilled orders. Factory payrolls slipped m/m but still showed net-hiring for the fifth straight month. During the last ten years, there has been a 90% correlation between the index level and the three-month change in manufacturing sector payrolls.

The prices paid index rose further to its highest since August 2008 and compares to negative readings one year ago. During the last ten years there has been a 66% correlation between the prices paid index and the three-month growth in the intermediate goods PPI. There has been an 77% correlation with the change in core intermediate goods prices.

The separate index of expected business conditions in six months slipped from its highest in nine months but remained firm. Expected prices paid slipped from nearly their highest level in two years. Expected capital expenditures inched higher but were well down from the February high.

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

Philadelphia Fed (%) April March February April '09 2009 2008 2007
General Activity Index 20.2 18.9 17.6 -22.3 -7.6 -21.4 5.0
  New Orders 13.9 9.3 22.7 -21.8 -9.7 -14.7 6.9
  Delivery Times 5.4 7.9 -2.1 -16.9 -15.3 -10.6 -6.1
  Number of Employees 7.3 8.4 7.4 -38.3 -23.8 -8.8 6.8
  Inventories 2.0 -11.0 3.2 -33.9 -24.0 -16.7 -3.7
Prices Paid Index 42.7 38.6 32.4 -29.2 -3.9 36.3 26.3
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