Global| Feb 20 2014Philadelphia Fed Business Conditions Index Is Disappointing
by:Tom Moeller
|in:Economy in Brief
Summary
The Philadelphia Federal Reserve Bank reported that its General Business Conditions Index for February fell sharply to -6.3 from 9.4 in January. It was the lowest level in twelve months and remained meaningfully lower than the [...]
The Philadelphia Federal Reserve Bank reported that its General Business Conditions Index for February fell sharply to -6.3 from 9.4 in January. It was the lowest level in twelve months and remained meaningfully lower than the September high. The latest figure fell well short of Consensus expectations for 10.0. The seasonally adjusted figure constructed by Haver Analytics fell to 47.7, the lowest level in nine 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.
Weakness in the overall index reflected sharp declines in new orders and shipments. The employment index also reversed its January improvement. During the last ten year there has been a 79% correlation between the employment index and the m/m change in nonfarm payrolls. To the upside was the inventories series.
Pricing power reversed its earlier improvement and fell to the lowest level since May. Twenty four percent of respondents paid higher prices but a higher ten 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 recovered slightly after its sharp January falloff. Improvement in the shipments, delivery time and inventories indexes offset declines in employment, new orders and unfilled orders. The future prices paid index fell sharply but the capital expenditures series improved.
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) | Feb | Jan | Dec | Feb'13 | 2013 | 2012 | 2011 |
|---|---|---|---|---|---|---|---|
| ISM-Adjusted General Business Conditions | 47.7 | 48.8 | 53.1 | 46.6 | 50.0 | 47.8 | 52.0 |
| General Business Conditions | -6.3 | 9.4 | 6.4 | -11.9 | 6.4 | -0.2 | 7.7 |
| New Orders | -5.2 | 5.1 | 12.9 | -7.7 | 7.3 | -0.1 | 7.2 |
| Shipments | -9.9 | 12.1 | 11.9 | -1.4 | 7.1 | -1.3 | 9.9 |
| Unfilled Orders | -2.6 | -1.0 | -6.6 | -12.2 | -3.8 | -6.5 | -0.9 |
| Delivery Time | 2.9 | -2.8 | -8.0 | -2.5 | -4.0 | -9.1 | -0.4 |
| Inventories | 3.6 | -19.6 | 16.0 | -8.6 | -3.2 | -6.0 | -0.3 |
| Number of Employees | 4.8 | 10.0 | 4.4 | -3.2 | 1.5 | 0.1 | 11.0 |
| Prices Paid | 14.2 | 18.7 | 16.4 | 10.6 | 16.7 | 17.7 | 39.3 |
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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