Global| Mar 17 2016Philadelphia Fed Business Conditions Index Improves
by:Tom Moeller
|in:Economy in Brief
Summary
The Philadelphia Federal Reserve reported that its General Factory Sector Business Conditions Index improved during March to 12.4 from an unrevised -2.8 in February. It was the first reading above break-even since August and the [...]
The Philadelphia Federal Reserve reported that its General Factory Sector Business Conditions Index improved during March to 12.4 from an unrevised -2.8 in February. It was the first reading above break-even since August and the highest level since April. The latest reading compared to expectations for -1.1 in the Action Economics Forecast Survey.
The ISM-adjusted General Business Conditions Index constructed by Haver Analytics increased to 51.7 from 44.7. It also was the highest level since April and is comparable to the ISM Composite Index. During the last ten years, there has been a 71% correlation between the adjusted Philadelphia Fed Index and real GDP growth.
As with the Empire State figures reported Tuesday, each of the component series improved. Shipments jumped to 22.1, the highest level since November 2014 while new orders similarly rose to 15.7. Delivery times slowed substantially as the index rose to 0.3, and unfilled orders fell at a substantially reduced rate. The employment index rose to a lesser degree m/m to -1.1 from -5.0. During the last ten years, there has been an 81% correlation between the jobs index and the m/m change in manufacturing payrolls. The rate of inventory decumulation also slowed modestly. The length of the average workweek also lengthened significantly.
On the pricing front, the prices paid index showed deflation for a seventh consecutive month. Fourteen percent of respondents paid higher prices, while 15% paid less. The prices received measure deteriorated sharply.
The future business activity index also recovered sharply to the highest level since November. New & unfilled orders both increased sharply along with shipments. Employment improved slightly but hours surged. Expected capital expenditures also rose to the highest level 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 ISM adjusted figure, calculated by Haver Analytics, is the average of five diffusion indexes, new orders, production, employment, supplier deliveries and inventories with equal weights (20% each). Each diffusion index is the sum of the percent responding "higher" and one-half of the percent responding "same."
The figures from the Philadelphia Federal Reserve can be found in Haver's SURVEYS database. The Action Economics figure is available in AS1REPNA.
| Philadelphia Fed (%, SA) | Mar | Feb | Jan | Mar'15 | 2015 | 2014 | 2013 |
|---|---|---|---|---|---|---|---|
| ISM-Adjusted General Business Conditions | 51.7 | 44.7 | 47.5 | 50.3 | 49.4 | 53.7 | 50.0 |
| General Factory Sector Business Conditions | 12.4 | -2.8 | -3.5 | 10.7 | 3.6 | 18.3 | 6.1 |
| New Orders | 15.7 | -5.3 | -1.4 | 9.4 | 2.9 | 14.9 | 7.2 |
| Shipments | 22.1 | 2.5 | 9.6 | 3.3 | 3.0 | 16.1 | 6.8 |
| Unfilled Orders | -1.9 | -12.7 | -8.8 | -9.6 | -5.1 | 3.3 | -3.9 |
| Delivery Time | 0.3 | -16.1 | -7.6 | -8.7 | -4.1 | 0.6 | -4.1 |
| Inventories | -12.7 | -17.1 | -15.7 | 1.4 | -1.5 | 1.7 | -3.5 |
| Number of Employees | -1.1 | -5.0 | -1.9 | 5.7 | 3.9 | 10.5 | 1.4 |
| Prices Paid | -0.9 | -2.2 | -1.1 | 1.3 | 1.5 | 21.6 | 16.4 |
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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