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Economy in Brief

Philadelphia Fed Business Conditions Index Turns Slightly Positive
by Tom Moeller  November 19, 2015

The Philadelphia Federal Reserve Bank reported that its General Factory Sector Business Conditions Index for November turned slightly positive following two straight negative readings. At 1.9, the latest figure was the highest since August. Expectations were for -0.5 in the Action Economics Forecast Survey.

The ISM adjusted general business conditions index constructed by Haver Analytics increased to 48.1 from 44.9. It is comparable to the ISM Composite index. Earlier readings were revised. During the last ten years, there has been a 71% correlation between the adjusted Philadelphia Fed index and real GDP growth.

The components of the overall index showed widespread improvement. Shipments and new orders both improved just modestly but unfilled orders gained significantly. The employment measure turned slightly positive. During the last ten years, there has been an 81% correlation between the jobs index and the m/m change in manufacturing payrolls.

On the pricing front, the prices paid index showed deflation for a second month and dropped to its lowest level in six. Fourteen percent of respondents paid higher prices and 19% paid less, up from 7% just two months ago. The prices received measure eased back into negative territory.

The future business activity index improved moderately due to widespread component gains.

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 Action Economics figure is available in AS1REPNA.

Philadelphia Fed (%, SA) Nov Oct Sep Nov'14 2014 2013 2012
ISM-Adjusted General Business Conditions 48.1 44.9 50.9 57.6 53.6 50.8 49.5
General Factory Sector Business Conditions 1.9 -4.5 -6.0 40.2 18.6 6.4 -0.2
  New Orders -3.7 -10.6 9.4 32.4 15.0 7.2 -0.1
  Shipments -2.5 -6.1 14.8 29.6 16.4 7.1 -1.3
  Unfilled Orders 2.4 -11.7 -6.6 7.8 3.3 -3.8 -6.5
  Delivery Time 0.5 -1.2 0.5 5.8 0.7 -4.0 -9.1
  Inventories -7.9 -17.4 -2.7 -6.5 1.8 -3.4 -6.0
  Number of Employees 2.6 -1.7 10.2 20.3 10.6 1.5 0.1
  Prices Paid -4.9 -0.1 0.5 15.8 21.7 16.6 17.7
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