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Economy in Brief

Philadelphia Fed Business Activity Index Increases
by Tom Moeller  January 19, 2012

The Philadelphia Federal Reserve Bank's General Business Conditions Index improved in January and continued to indicate expansion. The Index of General Business Conditions rose to 7.3 from 6.8 in December. The data for 2011 was revised. The figures have been positive for four consecutive months and improved from the Q3 average of -9.7. The latest figure was weaker than Consensus expectations for 11.0. Haver Analytics constructs an ISM-Adjusted reading of the Philadelphia number and it slipped to 50.7 from a revised 51.2 in December. During the last ten years there's been a 73.0% 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 76% correlation with q/q growth in real GDP.

Changes amongst the component series were mostly negative m/m. The employment figure, however, was roughly constant. During the last ten years, there has been an 84% correlation between the employment index level and the monthly change in manufacturing sector payrolls. The prices paid index rose to its highest level since June. Thirty-five percent of firms paid higher prices while three 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 the highest level since March led by shipments, new orders, employment, capital expenditures & prices paid.

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 (%) Jan Dec Nov Jan'10 2011 2010 2009
ISM-Adjusted General Business Conditions 50.7 51.2 52.5 54.2 51.9 50.7 41.2
General Business Conditions 7.3 6.8 3.1 17.3 7.7 12.1 -7.6
  New Orders 6.9 10.7 3.5 16.6 7.1 5.5 -9.5
  Shipments 5.7 9.1 6.0 12.1 9.9 8.3 -7.9
  Unfilled Orders -4.1 5.1 -1.1 7.6 -0.9 -3.0 -15.2
  Delivery Time -3.8 1.3 1.7 1.5 -0.4 0.9 -15.2
  Inventories -6.3 -11.5 7.2 4.0 -0.4 -5.0 -24.0
  Number of Employees 11.6 11.5 10.6 15.2 11.0 4.6 -23.8
  Prices Paid 31.8 30.4 25.9 51.9 38.6 28.8 -3.6
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