Global| Jan 20 2011Philadelphia Fed Index Slips M/M But Remains Near High
by:Tom Moeller
|in:Economy in Brief
Summary
The Philadelphia Federal Reserve Bank indicated that its January index of regional factory sector activity slipped to 19.3 from a downwardly revised 20.8 in December. Nevertheless, it remained near its highest level since April 2005. [...]
The Philadelphia Federal Reserve Bank indicated that its January index of
regional factory sector activity slipped to 19.3 from a downwardly revised 20.8
in December. Nevertheless, it remained near its highest level since April 2005.
The latest fell shy of Consensus expectations for 20.0 but it compares 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.
Despite the decline in the general activity index, there was widespread improvement amongst the index details. New orders, inventories and employment showed the greatest improvement. During the last ten years, there has been a 75% correlation between the index level and the three-month change in manufacturing sector payrolls. Shipments and unfilled orders showed lesser gains while delivery times and the average workweek fell.
The prices paid index also improved sharply to its highest level since July 2008. Fifty-four percent of firms paid higher prices while none paid lower. 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 also fell m/m from its highest level since March. Expectations for new orders led the decline but shipments, employment and capital expenditures also fell. Expectations for prices rose to its highest since 2005.
The survey panel consists of 150 manufacturing companies in Federal Reserve
District III (consisting of southeastern PA, southern NJ and
Delaware.) The diffusion indexes represent the percentage of respondents
indicating an increase minus the percentage indicating a decrease. The figures
from the Philadelphia Federal Reserve can be found in Haver's SURVEYS
database.
| Philadelphia Fed (%) | Jan | Dec | Nov | Jan '10 | 2010 | 2009 | 2008 |
|---|---|---|---|---|---|---|---|
| General Activity Index | 19.3 | 20.8 | 18.1 | 16.3 | 12.1 | -7.7 | -21.5 |
| New Orders | 23.6 | 10.6 | 8.0 | 8.0 | 5.4 | -9.8 | -14.9 |
| Shipments | 13.4 | 5.2 | 14.4 | 11.9 | 8.2 | -8.1 | -9.2 |
| Delivery Times | 2.3 | 7.0 | 2.0 | 6.0 | 0.9 | -15.3 | -10.6 |
| Number of Employees | 17.6 | 4.3 | 11.7 | 6.2 | 4.6 | -24.0 | -8.8 |
| Inventories | 6.8 | -5.9 | -5.5 | -2.1 | -5.1 | -24.1 | -16.7 |
| Prices Paid Index | 54.3 | 47.9 | 33.7 | 33.9 | 28.5 | -4.0 | 36.1 |
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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