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Economy in Brief

Philadelphia Fed Nonmanufacturing Business Activity Strengthens
by Tom Moeller  February 20, 2018

The Federal Reserve Bank of Philadelphia's Nonmanufacturing Business Index of current conditions at the company level increased to 32.1 in February from 29.3 during January. It was the highest index level since April. Forty-six percent of respondents reported an increase in current activity while 14% reported a decline. The expectations index at the company level for February eased to 58.5, but remained up from October's low of 41.7.

The sales or revenue index rose to the highest level in eight months. Unfilled orders index surged to the highest level since June 2014, as inventories accumulated at the strongest rate since January 2017. The new orders index eased. The number of full-time permanent employees recovered sharply after its January decline, but the index of part-time/temporary employment backpedaled. The average workweek reading fell to the lowest level since October 2016. The capital expenditures on facilities index reversed its January increase, falling to the lowest level since November 2016, while spending on equipment and software eased slightly.

The index of prices paid fell sharply, but remained stronger than its March 2016 low. A greatly lessened 26% of respondents paid higher prices while two percent paid less. The prices received index retraced a bit of its January surge, but the wages & benefits index moved slightly higher.

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) Feb Jan Dec Feb'17 2017 2016 2015
General Activity - Company 32.1 29.3 20.6 36.4 27.3 19.7 31.3
  New Orders 16.7 21.6 12.2 21.7 19.1 15.7 21.8
  Sales or Revenue 29.3 23.9 28.7 29.2 27.9 16.2 23.8
  Inventories 8.0 -3.6 2.6 5.9 3.8 4.4 5.2
  Number of Full-Time Permanent Employees 18.0 -0.4 10.5 13.3 14.8 11.7 15.6
  Prices Paid 23.7 27.8 27.1 15.9 21.4 17.5 19.3
  Wage & Benefit Costs 34.1 29.9 33.9 28.4 33.4 31.2 32.5
Expected General Activity - Company 58.5 62.6 45.1 56.3 49.9 43.0 53.8
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