Global| Oct 22 2019Philadelphia Fed Nonmanufacturing Business Activity Weakens Again
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 fell to 8.7 during October after declining to 29.4 in September. Nevertheless, the index of expected [...]
The Federal Reserve Bank of Philadelphia reported that its Nonmanufacturing Business Index of current conditions at the company level fell to 8.7 during October after declining to 29.4 in September. Nevertheless, the index of expected general activity rose to 47.5, the highest level since May. A separate general business activity reading for the region rose to 12.6, the highest level in three months.
Components of the company general activity index were mixed this month. New orders improved to 26.9, the highest level since November. Sales rose to 25.5 and recovered half of its September decline. A steady 41% of firms reported higher sales while a reduced 15% reported a decline. Unfilled orders also rose slightly. Working lower was the inventories measure which fell to the lowest level since May following four months of moderate accumulation.
Most labor market measures weakened in October. The full-time permanent employment measure fell to its lowest reading since January. A greatly lessened 23% of firms reported increased hiring while seven percent indicated a decline. Part-time/temporary employee hiring also fell to the lowest level since January. The workweek figure continued a decline to the weakest point since the beginning of the year. It was well below the July 2018 high. The wages & benefits measure improved moderately as part of its generally sideways movement in 2019.
Pricing power eased slightly this month. The index of prices paid fell to 20.5 and reversed it recent improvement from a July low of 12.2. A lessened 25% of firms reported higher prices while a steady five percent indicated a decline. Prices received declined to the lowest level since December of last year.
The capital expenditure measures were mixed. The physical plant measure fell to the lowest level since April 2015 and was down sharply from the January 2017 high. The equipment & software expenditure reading recovered slightly following its September collapse.
The Philadelphia Fed figures are diffusion indexes which are calculated by subtracting the percent of respondents reporting decreases in business activity 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) | Oct | Sep | Aug | Oct'18 | 2018 | 2017 | 2016 |
|---|---|---|---|---|---|---|---|
| General Activity - Company | 8.7 | 29.4 | 32.5 | 36.4 | 33.6 | 27.3 | 19.7 |
| New Orders | 26.9 | 9.7 | 9.4 | 14.6 | 24.3 | 19.1 | 15.8 |
| Sales or Revenue | 25.5 | 22.5 | 28.5 | 37.9 | 30.9 | 27.9 | 16.1 |
| Inventories | 0.9 | 5.0 | 5.8 | -0.5 | 5.2 | 3.8 | 4.3 |
| Number of Full-Time Permanent Employees | 15.9 | 22.1 | 22.1 | 17.2 | 18.2 | 14.8 | 11.7 |
| Part-Time/Temporary/Contract Employees | 10.8 | 23.5 | 13.5 | 15.7 | 15.6 | 12.4 | 11.8 |
| Prices Paid | 20.5 | 26.5 | 29.2 | 16.1 | 28.3 | 21.4 | 17.6 |
| Wage & Benefit Costs | 41.9 | 36.1 | 43.2 | 41.7 | 40.0 | 33.4 | 31.2 |
| Expected General Activity - Company | 47.5 | 30.7 | 26.8 | 46.0 | 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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