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Economy in Brief

Philadelphia Fed Index Increases As Shipments Rise
by Tom MoellerMay 20, 2010

The economic recovery continued this month according to the Philadelphia Federal Reserve Bank. It indicated that its May index of regional factory sector activity rose for the fourth consecutive month to the second highest level since early-2005. At 21.4 the index roughly matched Consensus expectations and has been positive since the summer. The latest figure compared to those near -40.0 at the recent recession's weakest.

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.

Improved shipments powered the June index gain. It was accompanied by higher new orders. Factory payrolls, however, eased but still showed net-hiring for the sixth 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 slipped from the recent high. 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 also fell, to the lowest level since April of last year. Expected prices paid also fell to the lowest level since last August. Expected capital expenditures also fell m/m and were well below the February high.

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

Philadelphia Fed (%) May April March May '09 2009 2008 2007
General Activity Index 21.4 20.2 18.9 -21.7 -7.6 -21.4 5.0
  New Orders 6.1 13.9 9.3 -23.2 -9.7 -14.7 6.9
  Shipments 15.8 5.6 13.6 -18.7 -8.0 -9.2 9.9
  Delivery Times -1.2 5.4 7.9 -19.1 -15.3 -10.6 -6.1
  Number of Employees 3.2 7.3 8.4 -29.8 -23.8 -8.8 6.8
  Inventories -7.9 2.0 -11.0 -27.8 -24.0 -16.7 -3.7
Prices Paid Index 35.5 42.7 38.6 -23.8 -3.9 36.3 26.3
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