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Economy in Brief

Philadelphia Fed Nonmanufacturing Business Conditions Weaken
by Tom Moeller  May 23, 2017

The Federal Reserve Bank of Philadelphia's Nonmanufacturing Business Index of current conditions in May fell to 25.8 from 34.9 during April. The index remained up versus one year ago. Forty-four percent of respondents reported an increase in current activity, while nineteen reported less. The expectations index at the company level for May declined to 49.9, a six-month low.

The new orders index fell as well. The sales/revenues index also was down m/m but up y/y. The inventories index dropped into negative territory for the first time since last fall following accumulation early this year. On the employment front, the index of full-time permanent employees fell to the weakest reading since September and reversed last month's strength. The index for part-time or temporary employment eased m/m but remained strong y/y. Wage & benefit cost gains declined moderately following last month's strength. The average employee workweek index held roughly steady. The capital expenditures reading on physical plant as well as equipment & software eased modestly.

The index for prices paid fell sharply to the lowest point in three months and was down y/y. The index of prices received eased moderately following a sharp April increase.

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) May Apr Mar May'16 2016 2015 2014
General Activity - Company 25.8 34.9 32.5 19.3 19.7 31.3 38.7
  New Orders 15.0 33.5 22.6 21.1 15.6 21.7 27.9
  Sales or Revenue 25.5 34.7 20.3 22.2 16.1 23.6 30.2
  Inventories -1.9 7.1 4.6 7.8 4.4 5.2 5.8
  Number of Full-Time Permanent Employees 9.3 26.4 17.2 11.6 11.7 15.5 17.3
  Prices Paid 16.6 31.6 18.0 20.9 17.5 19.2 19.7
Expected General Activity - Company 49.9 59.1 53.8 42.3 42.9 53.8 59.9
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