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Economy in Brief

Philadelphia Fed Business Conditions Index Ticks Up But Trends Sideways
by Tom Moeller  April 16, 2015

The Philadelphia Federal Reserve Bank reported that its General Factory Sector Business Conditions Index for April improved to 7.5 from an unrevised 5.0 in January. The number, nevertheless, remained well below the high of 40.2 reached in November. Expectations averaged 5.9 in the Action Economics Forecast Survey. The seasonally adjusted figure, constructed by Haver Analytics, also improved to 50.9, but remained in the range staked out this year. It was down from November's high of 58.7. It is comparable to the ISM Composite index. During the last ten years, there has been a 71% correlation between the adjusted Philadelphia Fed index and real GDP growth.

The employment index rose to its highest level since November. During the last ten years, there has been an 81% correlation between the employment index level and the m/m change in factory sector employment. Improvement also was logged in unfilled orders, delivery times and inventories. The shipments figure also increased but remained negative. The new orders series, however, fell to it lowest point since May 2013.

The prices paid index declined further into negative territory, the weakest reading since the recession's end. A lessened 6 percent of respondents paid higher prices while 14 percent paid less, up from last year's 1 percent low. 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 twelve months moved slightly higher but remained well below the August high. Shipments, unfilled orders, employment and the workweek rose but new orders, delivery times, inventories and prices paid fell.

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 ISM adjusted figure, calculated by Haver Analytics, is the average of five diffusion indexes, new orders, production, employment, supplier deliveries and inventories with equal weights (20% each). Each diffusion index is the sum of the percent responding "higher" and one-half of the percent responding "same."

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) Apr Mar Feb Apr'14 2014 2013 2012
ISM-Adjusted General Business Conditions 50.9 47.4 51.7 52.9 53.7 50.0 47.8
General Factory Sector Business Conditions 7.5 5.0 5.2 16.0 18.6 6.4 -0.2
  New Orders 0.7 3.9 5.4 15.0 15.0 7.2 -0.1
  Shipments -1.8 -7.8 8.1 21.0 16.4 7.1 -1.3
  Unfilled Orders -7.1 -13.8 7.3 2.3 3.3 -3.8 -6.5
  Delivery Time 0.5 -13.4 -4.6 -11.1 0.7 -4.0 -9.1
  Inventories 1.5 -2.3 15.2 -1.8 1.8 -3.4 -6.0
  Number of Employees 11.5 3.5 3.9 7.8 10.6 1.5 0.1
  Prices Paid -7.5 -3.0 4.7 14.5 21.7 16.6 17.7
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