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Economy in Brief

Philadelphia Fed Business Activity Index Remains Positive
by Tom Moeller  November 17, 2011

For the second consecutive month, the Philadelphia Federal Reserve Bank's index of the regional factory sector remained in positive territory. The November General Activity index slipped to 3.6 from an unrevised 8.7 in October. Both readings were improved versus the Q3 average of -15.0. The latest figure fell short of Consensus expectations for 9.3. Haver Analytics constructs an ISM-Adjusted reading of the Philadelphia number and it rose to 52.8 from 51.2 in October. During the last ten years there's been a 70% 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 68% correlation with q/q growth in real GDP.

The performance amongst the component series was mixed. New orders, shipments and unfilled orders fell but the delivery time and inventory series rose. The employment series also rose to its highest in six months. 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 recouped most of its October decline. Thirty-one percent of firms paid higher prices while nine percent 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 jumped to its highest level since March led by new orders, shipments and employment. Expectations for capital expenditures also improved to its highest level since July.

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(%) Nov Oct Sep Nov'10 2010 2009 2008
ISM-Adjusted Current Activity Index 52.8 51.2 45.3 52.6 50.7 41.2 43.2
Current Activity Index 3.6 8.7 -17.5 18.1 12.1 -7.7 -21.5
  New Orders 1.3 7.8 -11.3 8.0 5.4 -9.8 -14.9
  Shipments 7.3 13.6 -22.8 14.4 8.2 -8.1 -9.2
  Unfilled Orders -1.5 3.4 -10.4 2.7 -3.0 -15.3 -17.6
  Delivery Time 2.5 -0.5 -7.0 2.0 0.9 -15.3 -10.6
  Inventories 6.6 -7.7 10.2 -5.5 -5.1 -24.1 -16.7
  Number of Employees 12.0 1.4 5.8 11.7 4.6 -24.0 -8.8
  Prices Paid 22.8 20.0 23.2 33.7 28.5 -4.0 36.1
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