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Economy in Brief

Philadelphia Fed Business Activity Index Improves Sharply
by Tom Moeller  December 20, 2012

With the passage of Hurricane Sandy, business activity improved. The Philadelphia Federal Reserve Bank reported that its General Business Conditions Index rose sharply to 8.1 this month after falling to an unrevised -10.7 during November. Haver Analytics constructs a seasonally adjusted figure comparable to the ISM index and it jumped to 51.3, its highest level since April. During the last ten years there has been an 85% correlation between the adjusted Philadelphia Fed index and the ISM Mfg. PMI Composite index.

Improvement this month was across most of the component series, notably new orders, shipments and delivery times. In addition, the employment figure turned to a positive 3.6 after five consecutive months of being 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.

Pricing power remained at its highest level since February. 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 rose to its highest level in three months. Employment, new orders, shipments and capital expenditures each rose 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 (%) Dec Nov Oct Dec'11 2012 2011 2010
ISM-Adjusted General Business Conditions 51.3 45.1 46.6 51.2 47.7 51.9 50.7
General Business Conditions 8.1 -10.7 5.7 6.8 -0.2 7.7 12.1
  New Orders 10.7 -4.6 -0.6 10.7 -0.1 7.1 5.5
  Shipments 18.3 -6.7 -0.2 9.1 -1.3 9.9 8.3
  Unfilled Orders 2.3 -4.6 -6.3 5.1 -6.5 -0.9 -3.0
  Delivery Time -1.2 -13.8 -15.9 1.7 -9.1 -0.4 0.9
  Inventories -11.5 -12.5 2.1 7.2 -6.0 -0.4 -5.0
  Number of Employees 3.6 -6.8 -10.7 11.5 -0.0 11.0 4.6
  Prices Paid 27.8 27.9 19.0 30.4 17.6 38.6 28.8
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