Global| May 19 2011Philadelphia Fed Business Activity Index Declines Sharply
by:Tom Moeller
|in:Economy in Brief
Summary
The Philadelphia Federal Reserve Bank's index of regional factory sector activity dropped sharply in May to 3.9 from an unrevised 18.5 in April. It was the lowest since October and was well short of Consensus expectations for 20.0. [...]
The Philadelphia Federal Reserve Bank's index of regional factory sector activity dropped sharply in May to 3.9 from an unrevised 18.5 in April. It was the lowest since October and was well short of Consensus expectations for 20.0. During the last ten years, there has been a 76% correlation between the level of the Philadelphia Fed Business Conditions Index and the three-month growth in factory sector industrial production. There has been a 78% correlation with q/q growth in real GDP.
Month-to-month deterioration was broad-based amongst the component series. Orders fell sharply to its lowest since October. Several series turned negative including unfilled orders, inventories and delivery times, indicating faster delivery speeds. The employment figure rose m/m and made up declines during the prior two months. During the last ten years, there has been an 86% correlation between the index level and the monthly change in manufacturing sector payrolls.
The prices paid index fell to its lowest level since December. Fifty-six percent of firms paid higher prices while 8% paid less. During the last ten years there has been a 72% 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 also fell sharply to its lowest since January, 2009 as expectations for new orders, shipments, unfilled orders and delivery times cratered. Expectations for prices fell to its lowest since October.
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 (%) | May | Apr | Mar | Apr '10 | 2010 | 2009 | 2008 |
|---|---|---|---|---|---|---|---|
| General Activity Index | 3.9 | 18.5 | 43.4 | 21.2 | 12.1 | -7.7 | -21.5 |
| New Orders | 5.4 | 18.8 | 40.3 | 6.5 | 5.4 | -9.8 | -14.9 |
| Shipments | 6.5 | 29.1 | 34.9 | 14.1 | 8.2 | -8.1 | -9.2 |
| Unfilled Orders | -7.8 | 12.9 | 14.9 | -1.5 | -3.0 | -15.3 | -17.6 |
| Delivery Times | -2.3 | 11.2 | 8.5 | -0.8 | 0.9 | -15.3 | -10.6 |
| Inventories | -5.4 | 1.7 | 12.0 | -6.6 | -5.1 | -24.1 | -16.7 |
| Number of Employees | 22.1 | 12.3 | 18.2 | 3.4 | 4.6 | -24.0 | -8.8 |
| Prices Paid | 48.3 | 57.1 | 63.8 | 34.0 | 28.5 | -4.0 | 36.1 |
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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