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Economy in Brief

Philadelphia Fed Business Activity Index Reverses Most Of Its December Improvement
by Tom Moeller  January 17, 2013

The Philadelphia Federal Reserve Bank reported that its General Business Conditions Index fell to -5.8 after improving to 4.6 during December, revised down from 8.1. Haver Analytics constructs a seasonally adjusted figure comparable to the ISM index and it backpedaled to 46.4 from 49.8 in December, revised from 51.3. During the last ten years there has been an 85% correlation between the adjusted Philadelphia Fed index and the ISM Mfg. PMI Composite index.

Deterioration in the overall index was led by lower figures for new orders and shipments. The employment index also fell sharply. During the last ten years there has been an 80% correlation between the employment index and the m/m change in factory sector payrolls. To the upside were the readings for unfilled orders, delivery times and inventories, although each remained in negative territory.

Pricing power fell sharply to its lowest level in six months. 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 added to its December gain and rose to the highest level since September. Higher readings for new orders and shipments led the increase, offset by declines in delivery times, 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 (%) Jan Dec Nov Jan'12 2012 2011 2010
ISM-Adjusted General Business Conditions 46.4 49.8 45.5 49.9 47.7 51.9 50.7
General Business Conditions -5.8 4.6 -8.9 4.7 -0.2 7.7 12.1
  New Orders -4.3 4.9 -4.7 9.0 -0.1 7.2 5.5
  Shipments 0.4 14.7 -6.3 4.4 -1.4 9.9 8.3
  Unfilled Orders -1.0 -2.0 -5.7 -5.2 -6.5 -0.9 -3.0
  Delivery Time -2.0 -6.0 -11.4 -4.6 -9.1 -0.4 0.9
  Inventories -6.5 -7.8 -9.6 7.2 -6.0 -0.3 -4.9
  Number of Employees -5.2 -0.2 -6.9 11.5 0.0 11.0 4.7
  Prices Paid 14.7 23.5 27.9 27.1 17.6 39.3 29.0
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