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Economy in Brief

Philadelphia Fed Business Activity Index Improves Moderately
by Tom Moeller  September 15, 2011

The Philadelphia Federal Reserve Bank's index of regional factory sector for September recovered a piece of its August deterioration. Today's Philadelphia Fed General Activity index rose to -17.5 from an unrevised -30.7 in August. The figure roughly matched Consensus expectations for -15.0. Haver Analytics constructs an ISM-Adjusted reading of the Philadelphia number and it rose to 45.3 from 42.1 in August. During the last ten years there's 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's also been a 75% correlation with q/q growth in real GDP.

With the exception of the shipments component, month-to-month improvement occurred in each of the Fed's series especially inventories, new orders, unfilled orders and employment. During the last ten years, there has been an 86% correlation between the employment index level and the monthly change in manufacturing sector payrolls. The prices paid index also recaptured virtually all of its August deterioration. Twenty-nine percent of firms paid higher prices while a lessened 6% paid less. During the last ten years there has been a 72% correlation between the prices paid index and the three-month growth in the intermediate goods PPI.

The separate index of expected business conditions in six months recovered virtually all of its sharp August deterioration. Expectations for shipments and unfilled orders improved sharply but expectations for employment (up a little) and capital expenditures remained subdued.

The survey panel consists of 150 manufacturing companies in Federal Reserve District III (consisting of southeastern PA, southern NJ and Delaware.) The diffusion indexes represent the percentage of respondents indicating an increase minus the percentage indicating a decrease in activity. The figures from the Philadelphia Federal Reserve can be found in Haver's SURVEYS database. The Consensus expectations figure is available in AS1REPNA.

Philadelphia Fed (%) Sep Aug Jul Sep'10 2010 2009 2008
ISM Adjusted Current Activity Index 45.3 42.1 51.7 45.6 50.7 41.2 43.2
Current Activity Index -17.5 -30.7 3.2 -1.8 12.1 -7.7 -21.5
  New Orders -11.3 -26.8 0.1 -7.4 5.4 -9.8 -14.9
  Shipments -22.8 -13.9 4.3 -7.1 8.2 -8.1 -9.2
  Unfilled Orders -10.4 -20.9 -16.3 -7.3 -3.0 -15.3 -17.6
  Delivery Time -7.0 -18.1 6.4 -4.1 0.9 -15.3 -10.6
  Inventories 10.2 -9.8 1.4 -16.2 -5.1 -24.1 -16.7
  Number of Employees 5.8 -5.2 8.9 1.4 4.6 -24.0 -8.8
  Prices Paid 23.2 12.8 25.1 12.4 28.5 -4.0 36.1
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