Global| Oct 21 2010Philadelphia Fed Index Gains Slightly But Not Enough To Suggest Real Economic Improvement
by:Tom Moeller
|in:Economy in Brief
Summary
There was further loss of forward economic momentum last quarter. Moreover, the Philadelphia Federal Reserve Bank indicated that Q4 began with little improvement. The Bank's October index of regional factory sector activity improved [...]
There was further loss of forward economic momentum last quarter. Moreover, the Philadelphia Federal Reserve Bank indicated that Q4 began with little improvement. The Bank's October index of regional factory sector activity improved just slightly to 1.0 from an average -1.1 for all of last quarter. The latest about matched expectations for a reading of 0.0. Nevertheless, it still suggested modest economic growth and compared to readings near -40.0 at the recession's weakest.
During the last ten years there has been an 76% correlation between the level of the Philadelphia Fed Business Conditions Index and the three-month growth in factory sector industrial production. There has been a 78% correlation with q/q growth in real GDP.
There was broad-based but modest improvement amongst the index components. The shipments index rose to 1.4 from -2.5 during Q3. New orders, however, showed less improvement but the average workweek rose to its highest since July. Behind the factory sector's general malaise has been continued liquidation of inventories. The October figure fell to -18.6 from -7.9 during Q3. These figures compare to modest accumulation in the spring. Through it all, factory sector payrolls have continued to grow modestly. The October index was near the levels of the prior several months. During the last ten years, there has been a 75% correlation between the index level and the three-month change in manufacturing sector payrolls.
The prices paid index also improved to its highest level since May but remained down from the 2008 high. Thirty-four percent of firms raised prices. During the last ten years there has been a 70% correlation between the prices paid index and the three-month growth in the intermediate goods PPI. There has been an 81% correlation with the change in core intermediate goods prices.
The separate index of expected business conditions in six months jumped to its highest level since April. Expectations for new orders, shipments and employment rose sharply along with expected capital expenditures.
The figures from the Philadelphia Federal Reserve can be found in Haver's SURVEYS database.
| Philadelphia Fed (%) | October | September | August | Oct. '09 | 2009 | 2008 | 2007 |
|---|---|---|---|---|---|---|---|
| General Activity Index | 1.0 | -0.7 | -7.7 | 11.8 | -7.6 | -21.4 | 5.0 |
| New Orders | -5.0 | -8.1 | -7.1 | 7.1 | -9.7 | -14.7 | 6.9 |
| Shipments | 1.4 | -7.1 | -4.5 | 6.2 | -8.0 | -9.2 | 9.9 |
| Delivery Times | -0.3 | -4.1 | -11.0 | -9.5 | -15.3 | -10.6 | -6.1 |
| Number of Employees | 2.4 | 1.8 | -2.7 | -9.5 | -23.8 | -8.8 | 6.8 |
| Inventories | -18.6 | -16.7 | -11.6 | -31.9 | -24.0 | -16.7 | -3.7 |
| Prices Paid Index | 31.5 | 9.8 | 11.8 | 19.6 | -3.9 | 36.3 | 26.3 |
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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