Global| Sep 19 2013Philadelphia Fed Business Conditions Index Improves Sharply
by:Tom Moeller
|in:Economy in Brief
Summary
The Philadelphia Federal Reserve Bank reported that its General Business Conditions Index for September jumped to 22.3 from 9.3 in August. This latest reading was the highest since March 2011 and was much firmer than Consensus [...]
The Philadelphia Federal Reserve Bank reported that its General Business Conditions Index for September jumped to 22.3 from 9.3 in August. This latest reading was the highest since March 2011 and was much firmer than Consensus expectations for 10.0. Haver Analytics constructs a seasonally adjusted figure comparable to the ISM index. It jumped to 53.6, the highest level since April 2011. During the last ten years there has been a 71% correlation between the adjusted Philadelphia Fed index and real GDP growth.
Improvement in the component series was all-inclusive. The shipments figure jumped to 21.2 after turning slightly negative last month and the orders number rose to 21.2, its highest level since March, 2011. The inventory reading of -1.8 suggested a much slower rate of decumulation and the unfilled orders number jumped to its highest level since April 2011. The employment reading of 10.3 was its highest level since April 2012. During the last ten year there has been a 79% correlation between the employment index and the m/m change in nonfarm payrolls.
Pricing power also improved. The prices paid index of 25.3 reflected nearly one-third of respondents paying higher prices and just six percent of firms paying less. During the last ten years there has been a 71% correlation between the prices paid index and three-month growth in the intermediate goods PPI.
The separate index of expected business conditions in six months surged to 58.2, the highest level since September of 2003 (no typo). The new orders and shipments series jumped. The employment figure reversed its August decline and continued to indicate that near-term job growth will improve.
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 Consensus expectations figure is available in AS1REPNA.
| Philadelphia Fed (%, SA) | Sep | Aug | Jul | Sep'12 | 2012 | 2011 | 2010 |
|---|---|---|---|---|---|---|---|
| ISM-Adjusted General Business Conditions | 53.6 | 48.7 | 49.4 | 45.1 | 47.7 | 51.9 | 50.7 |
| General Business Conditions | 22.3 | 9.3 | 19.8 | 1.4 | -0.2 | 7.7 | 12.1 |
| New Orders | 21.2 | 5.3 | 10.2 | 2.5 | -0.1 | 7.2 | 5.5 |
| Shipments | 21.2 | -0.9 | 14.3 | -10.4 | -1.4 | 9.9 | 8.3 |
| Unfilled Orders | 4.3 | -2.9 | -1.8 | -5.9 | -6.5 | -0.9 | -3.0 |
| Delivery Time | -1.2 | -9.0 | 0.5 | -7.6 | -9.1 | -0.4 | 0.9 |
| Inventories | -1.8 | -11.3 | -21.6 | -19.8 | -6.0 | -0.3 | -4.9 |
| Number of Employees | 10.3 | 3.5 | 7.7 | -4.9 | 0.0 | 11.0 | 4.7 |
| Prices Paid | 25.3 | 17.3 | 21.5 | 15.4 | 17.7 | 39.3 | 29.0 |
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.
