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Economy in Brief

Philadelphia Fed Activity Index Slips M/M but Shows Continued Growth
by Tom Moeller  April 19, 2012

The Philadelphia Federal Reserve Bank's General Business Conditions Index slipped last month to 8.5 from 12.5 in March. Nevertheless, positive numbers for the last seven months indicate expansion in activity. The latest reading was lower than Consensus expectations for 12.0. Haver Analytics constructs an ISM-adjusted reading of the Philadelphia number. This figure rose to 52.4 this month, its highest level since November. 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.

Monthly changes were varied amongst the component series. To the downside were the figures for new orders, shipments and the length of the workweek. Improving were the readings for unfilled orders, inventories, delivery times and employment. During the last ten years there has been an 86% correlation between the employment figure and the m/m change in factory sector payrolls. Also improving slightly was the reading of prices paid. Twenty-seven percent of firms paid higher prices while five percent paid less. During the last ten years there has been a 70% 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 improved slightly. That made up a March decline but the figure remained well below its January high.

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 (%) Apr Mar Feb Apr'10 2011 2010 2009
ISM-Adjusted General Business Conditions 52.4 50.3 51.2 55.6 51.9 50.7 41.2
General Business Conditions 8.5 12.5 10.2 15.1 7.7 12.1 -7.6
  New Orders 2.7 3.3 11.7 15.3 7.1 5.5 -9.5
  Shipments 2.8 3.5 15.0 25.2 9.9 8.3 -7.9
  Unfilled Orders 3.2 -11.0 2.2 10.2 -0.9 -3.0 -15.2
  Delivery Time -3.4 -7.1 1.5 7.4 -0.4 0.9 -15.2
  Inventories 8.2 0.9 -12.9 1.5 -0.4 -5.0 -24.0
  Number of Employees 17.9 6.8 1.1 14.0 11.0 4.6 -23.8
  Prices Paid 22.5 18.7 38.7 54.4 38.6 28.8 -3.6
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