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Economy in Brief

Philly Fed Business Outlook Survey...Improves But Remains Negative
by Tom Moeller   September 16, 2010

It's of little solace that the latest General Activity Index in the Philadelphia Fed's September Business Outlook Survey bounced up. The reading improved this month to -0.7 from -7.7 in August, but that remained only the second negative reading since July of last year. Moreover, it remained down sharply from the highs above +20.0 in this year's second quarter.

Virtually all of this month's improvement occurred in two components. The delivery times series rose seven points (longer times), but remained negative, while the employment index rose to a modest +1.8 from -2.7 in August. During the last ten years there has been an 83% correlation between the level of the employment index and the m/m change in payroll employment.

Elsewhere, the news from the Philadelphia Fed was bleak including deterioration in the new orders, shipments, unfilled orders and inventory series. Each fell further into negative territory.

The message from the two pricing series confirms the notion of little, if any, improvement. The prices paid index fell to its lowest level since August of 2009 and the prices received index was its most negative since July of last year. During the last ten years there has been a 70% correlation between the prices paid index and the m/m change in the PPI for core intermediate goods.

Philadelphia Fed Business Outlook (%) September August July September 2009 2009 2008 2007
General Activity Index -0.7 -7.7 5.1 10.5 -7.6 -21.4 5.0
New Orders -8.1 -7.1 -4.3 1.9 -9.7 -14.7 6.9
Shipments -7.1 -4.5 4.0 2.9 -8.0 -9.2 9.9
Delivery Times -4.1 -11.0 -8.1 -10.4 -15.3 -10.6 -6.1
Inventories -16.7 -11.6 4.5 -19.0 -24.0 -16.7 -3.7
Number of Employees 1.8 -2.7 4.0 -15.7 -23.8 -8.8 6.8
Prices Paid 9.8 11.8 13.1 12.1 -3.9 36.3 26.3
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