Global| Jul 18 2013Philadelphia Fed Business Conditions Index Improves To Two-Year High
by:Tom Moeller
|in:Economy in Brief
Summary
Economic momentum is picking up. The Philadelphia Federal Reserve Bank reported that its General Business Conditions Index for July jumped to 19.8. This figure was the highest level since March 2011 and it followed an unrevised 12.5 [...]
Economic momentum is picking up. The Philadelphia Federal Reserve Bank reported that its General Business Conditions Index for July jumped to 19.8. This figure was the highest level since March 2011 and it followed an unrevised 12.5 in June. Less of a rise to 7.8 had been expected. Haver Analytics constructs a seasonally adjusted figure comparable to the ISM index. It slipped to 49.4 but remained the highest level since December. During the last ten years there has been a 71% correlation between the adjusted Philadelphia Fed index and real GDP growth.
Improvement in the Composite Index was driven by a higher employment figure of 7.7, the first positive number since March. During the last ten year there has been a 79% correlation between the employment index and the m/m change in nonfarm payrolls. The shipments series also rose to its highest level since December, the unfilled orders increased to its best level in six months and the vendor deliveries series turned positive, indicating slower delivery speeds. Offsetting these improvements was a sharp drop in the new orders index and a lower inventories reading.
Pricing power deteriorated slightly after its sharp June improvement. Twenty nine percent of firms paid higher prices while eight percent paid 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 jumped to 44.9, the highest level since March 2011. The employment figure surged to its highest reading since 1984 (no typo). The new orders also firmed to its highest level since 2003 while most other series improved significantly.
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) | Jul | Jun | May | Jul'12 | 2012 | 2011 | 2010 |
|---|---|---|---|---|---|---|---|
| ISM-Adjusted General Business Conditions | 49.4 | 49.6 | 45.8 | 45.7 | 47.7 | 51.9 | 50.7 |
| General Business Conditions | 19.8 | 12.5 | -5.2 | -9.1 | -0.2 | 7.7 | 12.1 |
| New Orders | 10.2 | 16.6 | -7.9 | -2.1 | -0.1 | 7.2 | 5.5 |
| Shipments | 14.3 | 4.1 | -8.5 | -7.5 | -1.4 | 9.9 | 8.3 |
| Unfilled Orders | -1.8 | -7.9 | -9.3 | -8.6 | -6.5 | -0.9 | -3.0 |
| Delivery Time | 0.5 | -9.3 | -6.0 | -14.5 | -9.1 | -0.4 | 0.9 |
| Inventories | -21.6 | -6.6 | 4.1 | -7.7 | -6.0 | -0.3 | -4.9 |
| Number of Employees | 7.7 | -5.4 | -8.7 | -4.7 | 0.0 | 11.0 | 4.7 |
| Prices Paid | 21.5 | 22.5 | 6.9 | 10.3 | 17.6 | 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.
