Global| Jan 17 2008Philadelphia Fed Index Plummets Further
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 cratered to -20.9 this month from what was a revised level of -1.6 in December. The latest level was the lowest [...]
The Philadelphia Federal Reserve Bank reported that it's Index of General Business Conditions in the manufacturing sector cratered to -20.9 this month from what was a revised level of -1.6 in December. The latest level was the lowest since the recession year 2001.
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 represented broad based moves by each of the sub indexes into negative territory. New orders and inventories were notably weak while shipments, unfilled orders and vendor deliveries all were down. The employment index also 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 also was strong, rising to the highest level since mid-2006. 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 sharply to the latest was the lowest reading since mid-2006. Expectations for new orders were notably weak but expectations for the number of employees rose for the second month.
| January | December | Jan. '07 | 2007 | 2006 | 2005 | |
|---|---|---|---|---|---|---|
| General Activity Index | -20.9 | -1.6 | 3.6 | 5.1 | 8.1 | 11.5 |
| Prices Paid Index | 49.8 | 36.5 | 15.6 | 26.4 | 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.
