Global| Jun 21 2012Philadelphia Fed Activity Index Slumps
by:Tom Moeller
|in:Economy in Brief
Summary
Another sign of economic weakening came today from the Philadelphia Federal Reserve Bank. Its General Business Conditions Index fell sharply this month to -16.6 from an unrevised -5.8 in May and compared to an expected 0.5. The figure [...]
Another sign of economic weakening came today from the Philadelphia Federal Reserve Bank. Its General Business Conditions Index fell sharply this month to -16.6 from an unrevised -5.8 in May and compared to an expected 0.5. The figure was the second consecutive negative reading and the most negative since August. Haver Analytics constructs a seasonally adjusted figure comparable to the ISM index. It slumped more than five points to 43.1, its lowest reading since July 2009.
Declines in the component series were all inclusive except for the number of employees, which rose slightly to 1.8 but remained well below the April high of 17.9. During the last ten years there has been an 83% correlation between the employment index and the m/m change in factory sector payrolls. The sharpest component series declines were logged by shipments, orders, inventories and the length of the workweek. Lesser declines were unfilled orders and delivery times.
Pricing power evaporated as the prices paid index dropped sharply into negative territory to its lowest level since July 2009.During the last ten years there has been a 70% correlation between the prices paid index and the three-month growth in the intermediate goods PPI.
The separate index of expected business conditions in six months ticked up to 19.5 from its lowest since August of last year. New orders, shipments, employment and capital expenditures led the rise.
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 figures from the Philadelphia Federal Reserve can be found in Haver's SURVEYS database. The Consensus expectations figure is available in AS1REPNA.
| Philadelphia Fed (%) | Jun | May | Apr | Jun'11 | 2011 | 2010 | 2009 |
|---|---|---|---|---|---|---|---|
| ISM-Adjusted General Business Conditions | 43.1 | 48.6 | 52.4 | 45.8 | 51.9 | 50.7 | 41.2 |
| General Business Conditions | -16.6 | -5.8 | 8.5 | -4.1 | 7.7 | 12.1 | -7.6 |
| New Orders | -18.8 | -1.2 | 2.7 | -6.5 | 7.1 | 5.5 | -9.5 |
| Shipments | -16.6 | 3.5 | 2.8 | 2.8 | 9.9 | 8.3 | -7.9 |
| Unfilled Orders | -16.3 | -9.4 | 3.2 | -13.3 | -0.9 | -3.0 | -15.2 |
| Delivery Time | -15.5 | -14.0 | -3.4 | -14.9 | -0.4 | 0.9 | -15.2 |
| Inventories | -8.7 | 4.5 | 8.2 | -10.4 | -0.4 | -5.0 | -24.0 |
| Number of Employees | 1.8 | -1.3 | 17.9 | 3.1 | 11.0 | 4.6 | -23.8 |
| Prices Paid | -2.8 | 5.0 | 22.5 | 32.8 | 38.6 | 28.8 | -3.6 |
Tom Moeller
AuthorMore in Author Profile »Prior to joining Haver Analytics in 2000, Mr. Moeller worked as the Economist at Chancellor Capital Management from 1985 to 1999. There, he developed comprehensive economic forecasts and interpreted economic data for equity and fixed income portfolio managers. Also at Chancellor, Mr. Moeller worked as an equity analyst and was responsible for researching and rating companies in the economically sensitive automobile and housing industries for investment in Chancellor’s equity portfolio. Prior to joining Chancellor, Mr. Moeller was an Economist at Citibank from 1979 to 1984. He also analyzed pricing behavior in the metals industry for the Council on Wage and Price Stability in Washington, D.C. In 1999, Mr. Moeller received the award for most accurate forecast from the Forecasters' Club of New York. From 1990 to 1992 he was President of the New York Association for Business Economists. Mr. Moeller earned an M.B.A. in Finance from Fordham University, where he graduated in 1987. He holds a Bachelor of Arts in Economics from George Washington University.
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