Global| Nov 21 2013Philadelphia Fed Business Conditions Index Retreats as Prices Advance
by:Tom Moeller
|in:Economy in Brief
Summary
The Philadelphia Federal Reserve Bank reported that its General Business Conditions Index for November fell back to 6.5 from 19.8 in October. The figure was at its lowest level in six months and was weaker than Consensus expectations [...]
The Philadelphia Federal Reserve Bank reported that its General Business Conditions Index for November fell back to 6.5 from 19.8 in October. The figure was at its lowest level in six months and was weaker than Consensus expectations for 16.1. The seasonally adjusted figure constructed by Haver Analytics also was weak. It retreated to 53.2 and it's 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 overall index reflected broad-based component weakness, especially shipments, new orders, unfilled orders and delivery times. In addition, the employment index dropped to its lowest level since June. During the last ten year there has been a 79% correlation between the employment index and the m/m change in nonfarm payrolls. Offsetting these declines was a jump in the inventories index to its highest level since June 2004.
Pricing power improved. The prices paid index jumped to 29.9, the highest level since September 2011. Thirty percent of respondents paid higher prices and no firms 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 fell sharply to 45.8, the lowest level in three months. The new orders and shipments series fell sharply though employment was roughly unchanged at a level well below its July high.
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) | Nov | Oct | Sep | Nov'12 | 2012 | 2011 | 2010 |
|---|---|---|---|---|---|---|---|
| ISM-Adjusted General Business Conditions | 53.2 | 56.9 | 53.6 | 45.5 | 47.7 | 51.9 | 50.7 |
| General Business Conditions | 6.5 | 19.8 | 22.3 | -8.9 | -0.2 | 7.7 | 12.1 |
| New Orders | 11.8 | 27.5 | 21.2 | -4.7 | -0.1 | 7.2 | 5.5 |
| Shipments | 5.6 | 20.4 | 21.2 | -6.3 | -1.4 | 9.9 | 8.3 |
| Unfilled Orders | -4.2 | 9.1 | 4.3 | -5.7 | -6.5 | -0.9 | -3.0 |
| Delivery Time | 3.2 | 6.1 | -1.2 | -11.4 | -9.1 | -0.4 | 0.9 |
| Inventories | 15.3 | 7.3 | -1.8 | -9.6 | -6.0 | -0.3 | -4.9 |
| Number of Employees | 1.1 | 15.4 | 10.3 | -6.9 | 0.0 | 11.0 | 4.7 |
| Prices Paid | 29.9 | 21.7 | 25.3 | 27.9 | 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.
