Global| Dec 20 2007Philadelphia Fed Index Lowest Since 2003
by:Tom Moeller
|in:Economy in Brief
Summary
The Philadelphia Federal Reserve Bank reported that it's Index of General Business Conditions in the manufacturing sector plunged this month to -5.7. The decline into negative territory was to the lowest level since June 2003. The [...]
The Philadelphia Federal Reserve Bank reported that it's Index of General Business Conditions in the manufacturing sector plunged this month to -5.7. The decline into negative territory was to the lowest level since June 2003.
The index is a diffusion index for each component or series. It reflects the increase in activity reported less the decrease.
During the last ten years there has been a 59% 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 42% correlation with q/q growth in real GDP.
The decline did not represent broad based weakness amongst the sub indexes. In fact new orders, shipments, unfilled orders and vendor deliveries each rose. However, the inventories and the employment indexes fell. During the last ten years there has been a 75% correlation between the employment index and the three-month growth in factory payrolls.
The business conditions index reflects a separate survey question, not the sub indexes.
The prices paid index fell and reversed increases during the prior two months. During the last ten years there has been a 76% correlation between the prices paid index and the three-month growth in the intermediate goods PPI. There has been an 85% correlation with the change in core intermediate goods prices.
The separate index of expected business conditions in six months fell further and added to its plunge during November. The latest was the lowest reading in twelve months. Expectations for new orders plummeted but expectations for the number of employees rose.
The latest Survey of Professional Forecasters from the Federal Reserve Bank of Philadelphia is available here.
| December | November | Dec. ‘06 | 2007 | 2006 | 2005 | |
|---|---|---|---|---|---|---|
| General Activity Index | -5.7 | 8.2 | 5.4 | 5.1 | 8.1 | 11.5 |
| Prices Paid Index | 35.0 | 37.7 | 25.2 | 26.3 | 36.6 | 40.1 |
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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