Global| Jul 15 2010Philadelphia Fed Index Suggests Further Economic Slowdown
by:Tom Moeller
|in:Economy in Brief
Summary
The Philadelphia Federal Reserve Bank indicated that as the third quarter began, the U.S. economy's forward momentum waned. The Bank's July index of regional factory sector activity fell for the second straight month to 5.1, the [...]
The
Philadelphia Federal Reserve Bank indicated that as the
third quarter
began, the U.S. economy's forward momentum waned. The Bank's July index
of
regional factory sector activity fell for the second straight month to
5.1, the
lowest level since August of last year. The latest was slightly lower
than
expectations for a reading of 10.0. Nevertheless, it still suggested
positive
economic growth and compared to readings near -40.0 at the recent
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. The latest survey from the Philadelphia Federal Reserve Bank can be found here.
Underlying the deterioration in the General Activity Index were negative readings for new orders and (quicker) delivery times. Shipments also slipped but the employment reading improved to its highest since April. During the last ten years, there has been a 75% correlation between the index level and the three-month change in manufacturing sector payrolls.
The prices paid index improved slightly m/m but remained well below its April high. 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 deteriorated sharply to its lowest level since January of last year. Expectations for new orders, shipments and employment fell sharply. However, expected capital expenditures improved m/m but remained well below the February high.
The figures from the Philadelphia Federal Reserve can be found in Haver's SURVEYS database.
| Philadelphia Fed (%) | July | June | May | July '09 | 2009 | 2008 | 2007 |
|---|---|---|---|---|---|---|---|
| General Activity Index | 5.1 | 8.0 | 21.4 | -8.9 | -7.6 | -21.4 | 5.0 |
| New Orders | -4.3 | 9.0 | 6.1 | -5.2 | -9.7 | -14.7 | 6.9 |
| Shipments | 4.0 | 14.2 | 15.8 | -12.1 | -8.0 | -9.2 | 9.9 |
| Delivery Times | -8.1 | 6.8 | -1.2 | -12.5 | -15.3 | -10.6 | -6.1 |
| Number of Employees | 4.0 | -1.5 | 3.2 | -25.9 | -23.8 | -8.8 | 6.8 |
| Inventories | 4.5 | 4.6 | -7.9 | -19.8 | -24.0 | -16.7 | -3.7 |
| Prices Paid Index | 13.1 | 10.0 | 35.5 | -8.7 | -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.
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