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Economy in Brief

Philadelphia Fed Business Activity Index Recovers
by Tom Moeller  March 21, 2013

The Philadelphia Federal Reserve Bank reported that its General Business Conditions Index rebounded during March to 2.0. That followed an unrevised  sharp February decline to -12.5. Haver Analytics constructs a seasonally adjusted figure comparable to the ISM index and it rose further to 49.3 from an unrevised 47.7 in February. During the last ten years there has been an 85% correlation between the adjusted Philadelphia Fed index and the ISM Manufacturing Composite index.

Improvement in the overall index reflected gains in most of the component series, notably inventories, new orders and unfilled orders. The employment index also rose to the highest level since April. 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 slightly to the 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 rose to the highest level since September. Higher readings for shipments, delivery times and prices paid 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

Philadelphia Fed (%) Mar Feb Jan Mar'12 2012 2011 2010
ISM-Adjusted General Business Conditions 49.3 47.7 46.4 49.2 47.7 51.9 50.7
General Business Conditions 2.0 -12.5 -5.8 8.6 -0.2 7.7 12.1
  New Orders 0.5 -7.8 -4.3 -0.7 -0.1 7.2 5.5
  Shipments 3.5 2.4 0.4 0.2 -1.4 9.9 8.3
  Unfilled Orders -6.4 -11.2 -1.0 -10.7 -6.5 -0.9 -3.0
  Delivery Time -7.5 0.2 -2.0 -8.5 -9.1 -0.4 0.9
  Inventories 0.0 -10.0 -6.5 -0.3 -6.0 -0.3 -4.9
  Number of Employees 2.7 0.9 -5.2 5.9 0.0 11.0 4.7
  Prices Paid 8.5 8.9 14.7 124.3 17.6 39.3 29.0
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