Global| Jun 15 2017Philadelphia Fed Factory Conditions Index Falls Sharply
by:Tom Moeller
|in:Economy in Brief
Summary
The Philadelphia Federal Reserve reported that its General Factory Sector Business Conditions Index declined to 27.6 during June and reversed most of May's jump to 38.8 in May. The latest monthly reading compared to expectations for [...]
The Philadelphia Federal Reserve reported that its General Factory Sector Business Conditions Index declined to 27.6 during June and reversed most of May's jump to 38.8 in May. The latest monthly reading compared to expectations for 25.0 in the Action Economics Forecast Survey.
The ISM-Adjusted General Business Conditions Index constructed by Haver Analytics fell slightly to 57.9 this month. 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.
The decline in the overall index reflected a sharply lower shipments reading. That was accompanied by higher figures for new orders, unfilled orders, inventories and a higher delivery time index, which indicated the slowest delivery times since 2004.
The employment series eased to the lowest level since February. During the last ten years, there has been an 81% correlation between the jobs index and the m/m change in manufacturing sector payrolls. The average workweek reading slipped but remained near the March 2004 high.
Prices paid declined to the lowest level since October. Twenty-eight percent of respondents (NSA) reported paying higher prices, while four percent paid less. The prices received index increased to the highest level in three months.
The future business activity index declined to the lowest level in nine months. Most of the sub-series fell sharply with the exception of shipments, employment and the workweek.
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'16 | 2016 | 2015 | 2014 |
|---|---|---|---|---|---|---|---|
| General Factory Sector Business Conditions | 27.6 | 38.8 | 22.0 | 4.1 | 4.8 | 3.6 | 18.3 |
| ISM-Adjusted Business Conditions | 57.9 | 58.1 | 59.5 | 46.6 | 48.2 | 49.4 | 53.7 |
| New Orders | 25.9 | 25.4 | 27.4 | -1.1 | 4.9 | 3.0 | 14.9 |
| Shipments | 28.5 | 39.1 | 23.4 | 2.0 | 6.9 | 3.1 | 16.3 |
| Unfilled Orders | 14.0 | 9.0 | 6.6 | -12.2 | -5.5 | -5.1 | 3.3 |
| Delivery Time | 13.9 | 6.4 | 13.2 | -7.5 | -4.6 | -4.1 | 0.6 |
| Inventories | 5.8 | 1.4 | 17.8 | -10.5 | -4.8 | -1.5 | 1.7 |
| Number of Employees | 16.1 | 17.3 | 19.9 | -9.2 | -5.7 | 3.9 | 10.5 |
| Prices Paid | 23.6 | 24.2 | 33.7 | 21.2 | 13.5 | 1.5 | 21.6 |
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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