Global| Apr 21 2011Philadelphia Fed Business Activity Index Falls Sharply
by:Tom Moeller
|in:Economy in Brief
Summary
The rate of improvement in economic conditions fell sharply this month according to the Philadelphia Federal Reserve Bank's index of regional factory sector activity. The figure dropped to 18.5 from an unrevised 43.4 in March. The [...]
The rate of improvement in economic conditions fell sharply this month according to the Philadelphia Federal Reserve Bank's index of regional factory sector activity. The figure dropped to 18.5 from an unrevised 43.4 in March. The decline more-than-reversed the March improvement and the level was the lowest since November. It fell well short of Consensus expectations for 36.9. During the last ten years, there has been an 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, but nowhere greater than for new orders. This series roughly halved versus March to 18.8. The inventories series fell sharply to its lowest since December while shipments fell to its lowest since January. It remained, however, near its six-year high. The employment figure also fell m/m but remained near the highest in four years. During the last ten years, there has been an 88% correlation between the index level and the monthly change in manufacturing sector payrolls.
The prices paid index fell to its lowest level since January. Fifty-nine percent of firms paid higher prices while 1.4% paid lower. 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 also fell sharply as expectations for new orders were at the lowest level since September. Shipments also fell but employment rose. Expectations for prices fell to its lowest since November.
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 (%) | Apr | Mar | Feb | Apr '10 | 2010 | 2009 | 2008 |
|---|---|---|---|---|---|---|---|
| General Activity Index | 18.5 | 43.4 | 35.9 | 20.3 | 12.1 | -7.7 | -21.5 |
| New Orders | 18.8 | 40.3 | 23.7 | 14.0 | 5.4 | -9.8 | -14.9 |
| Shipments | 29.1 | 34.9 | 35.2 | 10.9 | 8.2 | -8.1 | -9.2 |
| Unfilled Orders | 12.9 | 14.9 | 14.9 | -1.1 | -3.0 | -15.3 | -17.6 |
| Delivery Times | 11.2 | 8.5 | 10.0 | 3.8 | 0.9 | -15.3 | -10.6 |
| Inventories | 1.7 | 12.0 | 2.1 | 1.4 | -5.1 | -24.1 | -16.7 |
| Number of Employees | 12.3 | 18.2 | 23.6 | 7.4 | 4.6 | -24.0 | -8.8 |
| Prices Paid | 57.1 | 63.8 | 67.2 | 39.2 | 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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