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Economy in Brief

Philadelphia Fed Business Conditions Index Deteriorates While Pricing Improves
by Tom Moeller  July 16, 2015

The Philadelphia Federal Reserve Bank reported that its General Factory Sector Business Conditions Index for July declined to 5.7 from an unrevised 15.2 in June. Expectations were for 12.0 in the Action Economics Forecast Survey. The seasonally adjusted figure, constructed by Haver Analytics fell to 49.2, below the break-even level of 50 for the first time since March. 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.

Most components underlying the total index deteriorated this month including new orders, shipments, unfilled orders and inventories. Employment remained negative for the fifth month this year. During the last ten years, there has been an 81% correlation between the jobs index and the m/m change in manufacturing payrolls. The average workweek eased slightly.

On the pricing front, the prices paid index improved to its highest level in nine months. Twenty five percent of respondents paid higher prices while five percent paid less.

The future business activity index improved to its highest level in six months led by new orders, unfilled orders and prices received. Most other component series eased.

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) Jul Jun May Jul'14 2014 2013 2012
ISM-Adjusted General Business Conditions 49.2 52.0 50.3 58.2 53.7 50.0 47.8
General Factory Sector Business Conditions 5.7 15.2 6.7 22.8 18.6 6.4 -0.2
  New Orders 7.1 15.2 4.0 31.4 15.0 7.2 -0.1
  Shipments 4.4 14.3 1.0 29.9 16.4 7.1 -1.3
  Unfilled Orders -6.3 3.7 -1.1 7.6 3.3 -3.8 -6.5
  Delivery Time -4.5 -4.6 -3.6 8.4 0.7 -4.0 -9.1
  Inventories -5.7 3.1 -1.8 8.4 1.8 -3.4 -6.0
  Number of Employees -0.4 3.8 6.7 12.5 10.6 1.5 0.1
  Prices Paid 20.2 17.2 -14.2 32.3 21.7 16.6 17.7
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