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Economy in Brief

Philadelphia Fed Business Activity Index Shows Seasonal Deterioration
by Tom Moeller  February 21, 2013

The Philadelphia Federal Reserve Bank reported that its General Business Conditions Index fell sharply in February to -12.5. That followed a January drop to -5.8. Despite the latest decline, it was to be expected for this time of year. Haver Analytics constructs a seasonally adjusted figure comparable to the ISM index and it improved 47.7 from an unrevised 46.4 in January. During the last ten years there has been an 85% correlation between the adjusted Philadelphia Fed index and the ISM Manufacturing Composite index.

Deterioration in the overall index again was led by lower figures for unfilled orders, inventories and new orders. Conversely, the employment index reversed its January deterioration and rose to the highest level since June. During the last ten years, there has been an 80% correlation between the employment index and the m/m change in factory sector payrolls.

Pricing power fell sharply again to its lowest level since June. 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 further to its recent gains. It rose to the highest level since June. Higher readings for employment, new orders, delivery times and capital expenditures led the increase.

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

U.S. Manufacturing and the Importance of International Trade: It's Not What You Think from the Federal Reserve Bank of St. Louis can be found here here.

Philadelphia Fed (%) Feb Jan Dec Feb'12 2012 2011 2010
ISM-Adjusted General Business Conditions 47.7 46.4 49.8 49.6 47.7 51.9 50.7
General Business Conditions -12.5 -5.8 4.6 5.0 -0.2 7.7 12.1
  New Orders -7.8 -4.3 4.9 5.3 -0.1 7.2 5.5
  Shipments 2.4 0.4 14.7 8.6 -1.4 9.9 8.3
  Unfilled Orders -11.2 -1.0 -2.0 -1.8 -6.5 -0.9 -3.0
  Delivery Time 0.2 -2.0 -6.0 -0.8 -9.1 -0.4 0.9
  Inventories -10.0 -6.5 -7.8 -14.1 -6.0 -0.3 -4.9
  Number of Employees 0.9 -5.2 -0.2 0.9 0.0 11.0 4.7
  Prices Paid 8.9 14.7 23.5 30.2 17.6 39.3 29.0
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