Global| Jun 16 2016Philadelphia Fed Business Conditions Index Indicates Modest Growth
by:Tom Moeller
|in:Economy in Brief
Summary
The Philadelphia Federal Reserve reported that its General Factory Sector Business Conditions Index improved in June to 4.7 from an unrevised -1.8 in May. Despite the moderate reading, it remained up from December's low of -10.2. The [...]
The Philadelphia Federal Reserve reported that its General Factory Sector Business Conditions Index improved in June to 4.7 from an unrevised -1.8 in May. Despite the moderate reading, it remained up from December's low of -10.2. The increase compared to expectations for 0.7 in the Action Economics Forecast Survey.
The ISM-Adjusted General Business Conditions Index, constructed by Haver Analytics eased to 46.0 from 47.6, both figures indicating declines in activity. The ISM-Adjusted headline index is the average of five diffusion indexes, new orders, shipments, employment, supplier deliveries and inventories with equal weights (20% each). This figure 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.
Improvement in Philadelphia Fed index was similar to the Empire State reading, released yesterday. Amongst the components, only the delivery time, employee workweek and prices paid series increased. Elsewhere, the new orders and shipments indexes declined, followed by unfilled orders and inventories. Employment similarly fell and reversed half of its May rise. During the last ten years, there has been an 81% correlation between the jobs index and the m/m change in manufacturing payrolls.
On the pricing front, the prices paid index rose to the highest level since July 2014. Twenty-seven percent of respondents paid higher prices, while four percent paid less. Conversely, the prices received measure retreated to the lowest level in three months.
The future business activity index declined for the second consecutive month. New orders, shipments & employment each weakened, along with the workweek & capital spending.
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 - Manufacturing Business Outlook Survey (%, SA) | Jun | May | Apr | Jun'15 | 2015 | 2014 | 2013 |
|---|---|---|---|---|---|---|---|
| ISM-Adjusted General Business Conditions | 46.0 | 47.6 | 43.1 | 51.3 | 49.4 | 53.7 | 50.0 |
| General Factory Sector Business Conditions | 4.7 | -1.8 | -1.6 | 8.1 | 3.6 | 18.3 | 6.1 |
| New Orders | -3.0 | -1.9 | 0.0 | 9.6 | 2.9 | 14.9 | 7.2 |
| Shipments | -2.1 | -0.5 | -10.8 | 9.3 | 3.0 | 16.1 | 6.8 |
| Unfilled Orders | -12.6 | -8.8 | -6.3 | -0.8 | -5.1 | 3.3 | -3.9 |
| Delivery Time | -8.3 | -14.6 | -9.9 | -3.6 | -6.4 | 0.6 | -4.1 |
| Inventories | -9.9 | -2.5 | -20.5 | 2.4 | -1.5 | 1.7 | -3.5 |
| Number of Employees | -10.9 | -3.3 | -18.5 | 5.4 | 3.9 | 10.5 | 1.4 |
| Prices Paid | 23.0 | 15.7 | 13.2 | 12.0 | 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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