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Economy in Brief

Philadelphia Fed Business Conditions Index Recovers to a Two-Year High
by Tom Moeller  June 20, 2013

Economic recovery is taking hold. The Philadelphia Federal Reserve Bank reported that its General Business Conditions Index for June jumped to 12.5. This figure was the highest level since April 2011 and it followed an unrevised -5.2 in May. Another negative reading (-2.0) had been expected. Haver Analytics constructs a seasonally adjusted figure comparable to the ISM index. It also rose but more moderately to 49.6, its highest level since December. During the last ten years there has been a 71% correlation between the adjusted Philadelphia Fed index and real GDP growth.

Improvement in the Composite Index was driven by a surge in new orders to its highest level (16.6) since March 2011. The shipments series also recovered handsomely to its highest level this year (4.1). Lesser improvement was logged by unfilled orders and employment. During the last ten year there has been a 79% correlation between the employment index and the m/m change in nonfarm payrolls. To the downside, the delivery times and inventories indexes slipped.

Pricing power recovered sharply m/m to its highest level since December. A sharply higher 28.2% of firms paid higher prices while a reduced 5.7% paid less. 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 advanced to 33.7, the highest level in nine months. The employment figure surged to its highest reading since April 2011. The readings for new orders, shipments, unfilled orders also improved significantly.

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 (%, SA) Jun May Apr Jun'12 2012 2011 2010
ISM-Adjusted General Business Conditions 49.6 45.8 46.1 44.7 47.7 51.9 50.7
General Business Conditions 12.5 -5.2 1.3 -12.8 -0.2 7.7 12.1
  New Orders 16.6 -7.9 -1.0 -13.1 -0.1 7.2 5.5
  Shipments 4.1 -8.5 9.1 -13.8 -1.4 9.9 8.3
  Unfilled Orders -7.9 -9.3 -8.7 -11.3 -6.5 -0.9 -3.0
  Delivery Time -9.3 -6.0 -13.8 -14.0 -9.1 -0.4 0.9
  Inventories -6.6 4.1 -22.2 -7.8 -6.0 -0.3 -4.9
  Number of Employees -5.4 -8.7 -6.8 2.3 0.0 11.0 4.7
  Prices Paid 22.5 6.9 3.1 5.4 17.6 39.3 29.0
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