Global| Dec 18 2014Philadelphia Fed Business Conditions Index Indicates Moderating Growth
by:Tom Moeller
|in:Economy in Brief
Summary
The Philadelphia Federal Reserve Bank reported that its General Factory Sector Business Conditions Index for December declined to 24.5 and reversed most of its improvement to 40.8 during November. The figure, nevertheless, continued [...]
The Philadelphia Federal Reserve Bank reported that its General Factory Sector Business Conditions Index for December declined to 24.5 and reversed most of its improvement to 40.8 during November. The figure, nevertheless, continued to show improvement versus last year. It just missed expectations for 27.0 in the Action Economics Forecast Survey. The seasonally adjusted figure, constructed by Haver Analytics, fell to 54.2, the lowest level in six months. It 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.
Deterioration in the component series was broad-based last month. The new orders series fell to its lowest level in three months and shipments were off to the lowest level in six. The employment figure fell to its lowest level since April. During the last ten years there has been a 79% correlation between the employment index level and the m/m change in factory sector employment. The unfilled orders and delivery time series also fell sharply, the latter indicating the quickest delivery speeds since May. The inventory series was roughly stable, just off the October high. The average workweek series was roughly unchaged m/m as well, but down from the August high.
Pricing power continued to weaken sharply, to its lowest level since April. A lessened 23% of respondents paid higher prices, down from 36% six months ago. Nine percent paid less versus 1 percent six months ago. 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 twelve months retraced its November improvement with a fall to the lowest level since May. Declines were led by new orders, shipments, employment, delivery times and prices paid.
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) | Dec | Nov | Oct | Dec'13 | 2014 | 2013 | 2012 |
|---|---|---|---|---|---|---|---|
| ISM-Adjusted General Business Conditions | 54.2 | 59.5 | 55.6 | 53.1 | 53.7 | 50.0 | 47.8 |
| General Factory Sector Business Conditions | 24.5 | 40.8 | 20.7 | 6.4 | 18.5 | 6.4 | -0.2 |
| New Orders | 15.7 | 35.7 | 17.3 | 12.9 | 15.1 | 7.3 | -0.1 |
| Shipments | 16.1 | 31.9 | 16.6 | 11.9 | 16.4 | 7.1 | -1.3 |
| Unfilled Orders | 1.5 | 7.1 | 11.6 | -6.6 | 3.4 | -3.8 | -6.5 |
| Delivery Time | -1.2 | 5.8 | 0.6 | -8.0 | 0.7 | -4.0 | -9.1 |
| Inventories | 10.4 | 10.0 | 14.8 | 16.0 | 1.9 | -3.2 | -6.0 |
| Number of Employees | 7.2 | 22.4 | 12.1 | 4.4 | 10.6 | 1.5 | 0.1 |
| Prices Paid | 14.0 | 17.3 | 27.6 | 16.4 | 21.8 | 16.7 | 17.7 |
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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