Global| Jun 25 2019Philadelphia Fed Nonmanufacturing Business Activity Continues to Moderate
by:Tom Moeller
|in:Economy in Brief
Summary
The Federal Reserve Bank of Philadelphia reported that its Nonmanufacturing Business Index of current conditions at the company level declined to 12.2 during June, a second month of sharp decline. These figures remain below the high [...]
The Federal Reserve Bank of Philadelphia reported that its Nonmanufacturing Business Index of current conditions at the company level declined to 12.2 during June, a second month of sharp decline. These figures remain below the high of 45.7 reached nine months earlier. Sentiment about the future also soured. The index of expected conditions declined to 26.4, the lowest reading since January. The general business activity reading for the region fell to 8.2 and was below the high of 43.2 in May of last year.
Weakness in the overall survey this month reflected mixed performance in the sub-series. The sales measure weakened to a five-month low. The new orders, unfilled orders and inventories series rose slightly following sharp declines in May.
The labor market measures were mixed in June. The full-time permanent employment and part-time/temporary employment readings improved moderately. Thirty-one percent of firms reported higher full-time employment while seven percent reported a decline. The workweek figure continued to decline versus its March high. The wages & benefits measure increased and has been trending higher since January.
On the pricing front, the prices paid measure weakened m/m and remained well below the 2018 high. Twenty-seven percent of firms reported paying higher prices for components while four percent paid less. Also suggestive of a weak pricing environment during June, the prices received index fell sharply to a six-month low.
The capital expenditure measure for equipment & software improved sharply m/m to a seven-month high. The physical plant measure held steady m/m, but has been trending lower since January 2017.
The Philadelphia Fed figures are diffusion indexes which are calculated by subtracting the percent of respondents reporting poorer business conditions from those reporting improvement. So, readings above zero indicate more positive than negative responses. These indexes have a good correlation with growth in the series covered. The data are available in Haver's SURVEYS database.
| Federal Reserve Bank of Philadelphia: Nonmanufacturing Business Outlook Survey (Diffusion Index, SA) | Jun | May | Apr | Jun'18 | 2018 | 2017 | 2016 |
|---|---|---|---|---|---|---|---|
| General Activity - Company | 12.2 | 28.1 | 39.2 | 39.0 | 33.6 | 27.3 | 19.7 |
| New Orders | 14.3 | 10.6 | 25.4 | 31.4 | 24.3 | 19.1 | 15.8 |
| Sales or Revenue | 17.0 | 26.6 | 37.2 | 27.1 | 30.9 | 27.9 | 16.1 |
| Inventories | 2.9 | -3.2 | 0.8 | 5.1 | 5.2 | 3.8 | 4.3 |
| Number of Full-Time Permanent Employees | 23.8 | 20.5 | 18.3 | 20.5 | 18.2 | 14.8 | 11.7 |
| Part-Time/Temporary/Contract Employees | 20.2 | 11.3 | 24.3 | 20.9 | 15.6 | 12.4 | 11.8 |
| Prices Paid | 22.3 | 25.9 | 27.1 | 32.6 | 28.3 | 21.4 | 17.6 |
| Wage & Benefit Costs | 43.6 | 38.9 | 38.2 | 48.9 | 40.0 | 33.4 | 31.2 |
| Expected General Activity - Company | 26.4 | 56.9 | 44.0 | 55.6 | 50.2 | 50.1 | 43.2 |
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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