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Economy in Brief

Adjusted Philadelphia Fed Business Activity Index Nears Recovery Low
by Tom Moeller  September 20, 2012

The Philadelphia Federal Reserve Bank reported that its General Business Conditions Index rose to -1.9 this month after gaining to an unrevised -7.1 during August. The improvement beat expectations for -4.0. That, however, is where the good news ends. Haver Analytics constructs a seasonally adjusted figure comparable to the ISM index. It fell to 42.9, it lowest level since July 2009, the first month of this economic recovery.

Monthly improvement amongst the component series centered on orders and delivery times. The employment figure also improved slightly to -7.3 but remained near its recovery low. During the last ten years there has been an 83% correlation between the employment index and the m/m change in factory sector payrolls. Offsetting these gains where sharp deteriorations in both the shipments and inventories components.

Pricing power also deteriorated m/m. The index decline to 8.0 retraced nearly half of its August improvement. 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 improved sharply to 41.2, the highest level since March of last year. New orders, shipments, unfilled orders, delivery times, and employment each jumped.

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 (%) Sep Aug Jul Sep'11 2011 2010 2009
ISM-Adjusted General Business Conditions 42.9 45.4 44.9 46.5 51.9 50.7 41.2
General Business Conditions -1.9 -7.1 -12.9 -12.7 7.7 12.1 -7.6
  New Orders 1.0 -5.5 -6.9 -5.5 7.1 5.5 -9.5
  Shipments -21.2 -11.3 -8.6 -16.6 9.9 8.3 -7.9
  Unfilled Orders -8.2 -16.2 -9.5 -8.7 -0.9 -3.0 -15.2
  Delivery Time -8.4 -12.2 -15.7 -4.9 -0.4 0.9 -15.2
  Inventories -21.7 -6.9 -7.5 8.7 -0.4 -5.0 -24.0
  Number of Employees -7.3 -8.6 -8.4 7.3 11.0 4.6 -23.8
  Prices Paid 8.0 11.2 3.7 25.0 38.6 28.8 -3.6
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