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Economy in Brief

Philadelphia Fed Nonmanufacturing Business Index Improves Broadly
by Tom Moeller  December 20, 2016

The Federal Reserve Bank of Philadelphia's Nonmanufacturing Business Index of current conditions in December rose to 30.4 from 15.6 in November. It rebounded to the highest level since June 2015. Forty-seven percent of respondents reported an increase in current activity, a thirteen-month high. Despite the monthly rebound, the figure for all of last year fell sharply from 2015. The expectations index for December surged to 65.8, the highest level since August of last year. Expectations for regional activity also were greatly improved.

Virtually all of the index components improved. The new orders index jumped to the highest level since July with 41% of respondents reporting an increase. Sales/revenues similarly improved. On the employment front, the index of full-time permanent employees rose to the highest point since October or last year, while the index for part-time or temporary employment also strengthened. The average employee workweek rebounded to nearly the highest level since April, but wage & benefit costs rose just modestly. These costs have been trending sideways since 2011. Capital expenditures on physical plant strengthened along with the equipment & software reading. The index for prices paid increased m/m, but remained sharply below the Q2 and Q3 highs. The index of prices received fell sharply m/m.

The Philadelphia Fed figures are diffusion indexes which are calculated by subtracting the percent of respondents reporting poorer business conditions from those reporting improvement. So, readings above zero indicate more positive than negative responses. These indexes have a good correlation with growth in the series covered. The data are available in Haver's SURVEYS database.

Federal Reserve Bank of Philadelphia: Nonmanufacturing Business Outlook Survey (Diffusion Index, SA) Dec Nov Oct Dec'15 2016 2015 2014
General Activity - Company 30.4 15.6 16.3 24.8 19.7 31.4 38.8
  New Orders 21.6 12.6 5.7 17.2 15.6 21.7 27.9
  Sales or Revenue 23.5 17.2 6.0 24.0 16.1 23.6 30.2
  Inventories 11.9 5.6 7.6 2.9 4.3 5.2 5.8
  Number of Full-Time Permanent Employees 19.7 14.3 8.5 15.7 11.7 15.6 17.3
  Prices Paid 16.9 16.5 15.0 19.7 17.5 19.3 19.7
Expected General Activity - Company 65.8 40.4 40.4 56.6 43.1 54.0 60.1
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