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Economy in Brief

Philadelphia Fed Activity Index Remains Weak
by Tom Moeller  July 19, 2012

The Philadelphia Federal Reserve Bank reported that its General Business Conditions Index ticked up to -12.9 after an unrevised sharp decline last month to -16.6. The figure was the third consecutive monthly negative reading and compared to expectations for -8.0. Haver Analytics constructs a seasonally adjusted figure comparable to the ISM index. It also rose slightly to 44.9, still near its lowest since July 2009.

Less negative readings for most of the component series provided the overall index's rebound. However the index for the number of employees was sharply negative for the first time since November 2009. During the last ten years there has been an 83% correlation between the employment index and the m/m change in factory sector payrolls.

Pricing power also remained weak. The m/m uptick to 3.7 left it near the cycle low 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 was roughly stable at 19.3, near its lowest since August of last year. New orders and employment declined sharply.

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 (%) Jul Jun May Jul'11 2011 2010 2009
ISM-Adjusted General Business Conditions 44.9 43.1 48.6 52.0 51.9 50.7 41.2
General Business Conditions -12.9 -16.6 -5.8 6.2 7.7 12.1 -7.6
  New Orders -6.9 -18.8 -1.2 0.5 7.1 5.5 -9.5
  Shipments -8.6 -16.6 3.5 8.2 9.9 8.3 -7.9
  Unfilled Orders -9.5 -16.3 -9.4 -11.9 -0.9 -3.0 -15.2
  Delivery Time -15.7 -15.5 -14.0 6.8 -0.4 0.9 -15.2
  Inventories -7.5 -8.7 4.5 -1.0 -0.4 -5.0 -24.0
  Number of Employees -8.4 1.8 -1.3 9.5 11.0 4.6 -23.8
  Prices Paid 3.7 -2.8 5.0 30.2 38.6 28.8 -3.6
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