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Economy in Brief

Philadelphia Fed Factory Conditions Index Falls Sharply
by Tom Moeller  June 15, 2017

The Philadelphia Federal Reserve reported that its General Factory Sector Business Conditions Index declined to 27.6 during June and reversed most of May's jump to 38.8 in May. The latest monthly reading compared to expectations for 25.0 in the Action Economics Forecast Survey.

The ISM-Adjusted General Business Conditions Index constructed by Haver Analytics fell slightly to 57.9 this month. This figure 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 decline in the overall index reflected a sharply lower shipments reading. That was accompanied by higher figures for new orders, unfilled orders, inventories and a higher delivery time index, which indicated the slowest delivery times since 2004.

The employment series eased to the lowest level since February. During the last ten years, there has been an 81% correlation between the jobs index and the m/m change in manufacturing sector payrolls. The average workweek reading slipped but remained near the March 2004 high.

Prices paid declined to the lowest level since October. Twenty-eight percent of respondents (NSA) reported paying higher prices, while four percent paid less. The prices received index increased to the highest level in three months.

The future business activity index declined to the lowest level in nine months. Most of the sub-series fell sharply with the exception of shipments, employment and the workweek.

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 - Manufacturing Business Outlook Survey (%, SA) Jun May Apr Jun'16 2016 2015 2014
General Factory Sector Business Conditions 27.6 38.8 22.0 4.1 4.8 3.6 18.3
ISM-Adjusted Business Conditions 57.9 58.1 59.5 46.6 48.2 49.4 53.7
  New Orders 25.9 25.4 27.4 -1.1 4.9 3.0 14.9
  Shipments 28.5 39.1 23.4 2.0 6.9 3.1 16.3
  Unfilled Orders 14.0 9.0 6.6 -12.2 -5.5 -5.1 3.3
  Delivery Time 13.9 6.4 13.2 -7.5 -4.6 -4.1 0.6
  Inventories 5.8 1.4 17.8 -10.5 -4.8 -1.5 1.7
  Number of Employees 16.1 17.3 19.9 -9.2 -5.7 3.9 10.5
  Prices Paid 23.6 24.2 33.7 21.2 13.5 1.5 21.6
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