Global| Aug 20 2009Philadelphia Fed Index Remains Positive At Its Highest Level Since 2007
by:Tom Moeller
|in:Economy in Brief
Summary
The Philadelphia Federal Reserve Bank indicated that its August index of factory sector activity in the region rose to its highest since November of 2007. The level of 4.2 compared to figures near -40.0 this past fall and winter. [...]
The Philadelphia Federal Reserve Bank indicated that its August index of factory sector activity in the region rose to its highest since November of 2007. The level of 4.2 compared to figures near -40.0 this past fall and winter. Consensus expectations had been for a slightly negative reading of -1.5 for this month.
During the last ten years there has been a 77% 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 70% correlation with q/q growth in real GDP. The latest survey from the Philadelphia Federal Reserve Bank can be found here.
Amongst the components, new orders improved to 4.2 from -2.2 and the latest figure was the highest since 2007. A sharp rise in the inventory component to its highest since 2007 may indicate that the period of strong inventory decumulation reached its end. The latest figure of 0.3 compares to a low of -55.6 reached this past March. Also showing improvement was the employment index. It rose to a still negative -12.9 but that compared with a low of -52.0 during March. During the last ten years there has been a 79% correlation between the index level and the m/m change in manufacturing sector payrolls.
Improved pricing power accompanied the gains in real activity. The prices paid index jumped to its first positive reading since last October. During the last ten years there has been a 74% correlation between the prices paid index and the three-month growth in the intermediate goods PPI. There has been an 83% correlation with the change in core intermediate goods prices.
Expected business conditions in six months also have improved. The August index ticked up to 56.8 and recovered most of its July decline. The latest figure was still near its highest level since 2003. Most of the index components moved sideways at improved levels but the inventories series jumped sharply to new cycle high.
The figures from the Philadelphia Federal Reserve can be found in Haver's SURVEYS database.
| Philadelphia Fed (%) | August | July | August '08 | 2008 | 2007 | 2006 |
|---|---|---|---|---|---|---|
| General Activity Index | 4.2 | -7.5 | -20.1 | -21.3 | 5.0 | 8.0 |
| New Orders | 4.2 | -2.2 | -15.2 | -14.7 | 6.9 | 9.0 |
| Number of Employees | -12.9 | -25.3 | -4.6 | -8.7 | 6.8 | 9.0 |
| Prices Paid Index | 10.0 | -3.5 | 53.0 | 36.4 | 26.3 | 36.7 |
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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