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Economy in Brief

Philadelphia Fed Business Activity Index Improves
by Tom Moeller  August 16, 2012

The Philadelphia Federal Reserve Bank reported that its General Business Conditions Index rose to -7.1 this month after gaining to an unrevised -12.9 during July. The improvement roughly matched expectations for -5.0. Haver Analytics constructs a seasonally adjusted figure comparable to the ISM index. It also rose to 45.4, its highest level in three months.

Monthly improvement amongst the component series was widespread including new orders, delivery times and inventories. The index for the number of employees was roughly unchanged and still negative. During the last ten years there has been an 83% correlation between the employment index and the m/m change in factory sector payrolls. The readings for shipments and unfilled orders deteriorated.

Pricing power improved m/m. The rise to 11.2 was to its highest level since April. During the last ten years there has been a 71% correlation between the prices paid index and three-month growth in the intermediate goods PPI.

The separate index of expected business conditions in six months deteriorated to 12.5, its lowest since August of last year. New orders, shipments, unfilled orders and employment each fell offset by gains in delivery times, inventories, prices paid and capital expenditures.

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 (%) Aug Jul Jun Aug'11 2011 2010 2009
ISM-Adjusted General Business Conditions 45.4 44.9 43.1 44.2 51.9 50.7 41.2
General Business Conditions -7.1 -12.9 -16.6 22.7 7.7 12.1 -7.6
  New Orders -5.5 -6.9 -18.8 -22.2 7.1 5.5 -9.5
  Shipments -11.3 -8.6 -16.6 -8.9 9.9 8.3 -7.9
  Unfilled Orders -16.2 -9.5 -16.3 -19.6 -0.9 -3.0 -15.2
  Delivery Time -12.2 -15.7 -15.5 -15.1 -0.4 0.9 -15.2
  Inventories -6.9 -7.5 -8.7 -8.5 -0.4 -5.0 -24.0
  Number of Employees -8.6 -8.4 1.8 -0.9 11.0 4.6 -23.8
  Prices Paid 11.2 3.7 -2.8 20.1 38.6 28.8 -3.6
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