Global| Mar 19 2010Philadelphia Fed Index Increases With Shorter Delivery Speeds & Higher Prices
by:Tom Moeller
|in:Economy in Brief
Summary
You'd think the economy was on the cusp of overheating. But seriously, the Philadelphia Federal Reserve Bank indicated yesterday that its index of regional factory sector activity improved this month to the second highest level since [...]
You'd think the economy was on the cusp of overheating. But seriously, the Philadelphia Federal Reserve Bank indicated yesterday that its index of regional factory sector activity improved this month to the second highest level since early-2005. At 18.9 the index slightly exceeded Consensus expectations and has been positive since the summer. The latest figure compared to those near -40.0 this past fall and winter.
During the last ten years there has been a 75% 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 73% correlation with q/q growth in real GDP. The latest survey from the Philadelphia Federal Reserve Bank can be found here.
A slowing of vendor delivery speeds, a lengthened employee workweek and higher prices provided the lift behind the general activity index. These gains may, however, reflect harsh winter weather. Amongst other components, new orders fell sharply and reversed much of the February improvement. Inventories also ran off at a quickened rate but the employment series improved to its highest since 2007. During the last ten years, there has been a 90% correlation between the index level and the three-month change in manufacturing sector payrolls.
The prices paid index rose to its highest since August 2008 and compares to negative readings one year ago. During the last ten years there has been a 66% correlation between the prices paid index and the three-month growth in the intermediate goods PPI. There has been an 77% correlation with the change in core intermediate goods prices.
Supporting the notion of a winter-weather effect was the rebound in the separate index of expected business conditions in six months to its highest in nine months. Many of the index subseries rose including new orders and the number of employees. Expected prices paid rose to nearly the highest level in two years and the average workweek lengthened. Expected capital expenditures fell as did unfilled orders.
The figures from the Philadelphia Federal Reserve can be found in Haver's SURVEYS database.
| Philadelphia Fed (%) | March | February | January | March '09 | 2009 | 2008 | 2007 |
|---|---|---|---|---|---|---|---|
| General Activity Index | 18.9 | 17.6 | 15.2 | -31.4 | -7.6 | -21.4 | 5.0 |
| New Orders | 9.3 | 22.7 | 3.2 | -37.5 | -9.7 | -14.7 | 6.9 |
| Delivery Times | 7.9 | -2.1 | 6.6 | -28.0 | -15.3 | -10.6 | -6.1 |
| Number of Employees | 8.4 | 7.4 | 6.1 | -49.8 | -23.8 | -8.8 | 6.8 |
| Inventories | -11.0 | 3.2 | -1.6 | -52.4 | -24.0 | -16.7 | -3.7 |
| Prices Paid Index | 38.6 | 32.4 | 33.2 | -28.8 | -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.
More Economy in Brief
