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Economy in Brief

Philadelphia Fed Nonmanufacturing Business Activity Index Weakens
by Tom Moeller  May 21, 2019

The Federal Reserve Bank of Philadelphia reported that its Nonmanufacturing Business Index of current conditions at the company level fell to 28.1 during May after rising slightly in April. These figures remain below the high of 45.7 reached in September of last year. The index of expected business conditions rose to 56.9, a three-month high.

Weakness in the overall survey reflected declines in most of the sub-series. The new orders index declined to the lowest level since January. The sales measure weakened to a three-month low and unfilled orders fell sharply. The inventories measure fell to nearly a three-year low.

The labor market measures were mixed. The full-time permanent employment improved slightly and has been trending upward for two years. The part-time/temporary employment and the workweek figures fell m/m, but also have been trending higher. The wages & benefits measure was little changed m/m, well below last year's highs.

On the pricing front, the prices paid measure declined m/m and was below the 2018 high. The prices received index improved markedly.

The capital expenditure measures on both plant & equipment improved m/m but remained well below the highs registered in earlier years.

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'18 2018 2017 2016
General Activity - Company 28.1 39.2 38.3 38.1 33.6 27.3 19.7
  New Orders 10.6 25.4 24.5 32.1 24.3 19.1 15.8
  Sales or Revenue 26.6 37.2 42.5 34.0 30.9 27.9 16.1
  Inventories -3.2 0.8 10.3 7.0 5.2 3.8 4.3
  Number of Full-Time Permanent Employees 20.5 18.3 33.3 7.9 18.2 14.8 11.7
  Prices Paid 25.9 27.1 28.0 32.8 28.3 21.4 17.6
  Wage & Benefit Costs 38.9 38.2 43.8 45.0 40.0 33.4 31.2
Expected General Activity - Company 56.9 44.0 45.8 46.6 50.2 50.1 43.2
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