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Economy in Brief

Philadelphia Fed Index Increases With Broad-Based Component Strength
by Tom Moeller February 18, 2010

The Philadelphia Federal Reserve Bank indicated that its index of regional factory sector activity rose modestly this month and made up some of a January decline. At 17.6 the index about matched Consensus expectations and has been positive since the summer. The series was near its highest level since early-2005 and compared to figures near -40.0 this past fall and winter.

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, shipments and inventories were notably strong above break-even. The employment series also rose to its highest since 2007. During the last ten years there has been a 91% correlation between the index level and the three-month change in manufacturing sector payrolls. 

The prices paid index rose sharply to its highest level since August of last year and compares to negative readings this past winter and spring. During the last ten years there has been a 69% correlation between the prices paid index and the three-month growth in the intermediate goods PPI. There has been an 80% correlation with the change in core intermediate goods prices.

The separate index of expected business conditions in six months fell to its lowest level since October 2008. Many of the index components including orders, unfilled orders, delivery times and inventories fell while shipments and capital expenditures rose.

The figures from the Philadelphia Federal Reserve can be found in Haver's SURVEYS database.

News About the Future and Economic Fluctuations from the Federal Reserve Bank of Philadelphia can be found here

Philadelphia Fed (%) February January December February '09 2009 2008 2007
General Activity Index 17.6 15.2 22.5 -36.1 -7.6 -21.4 5.0
  New Orders 22.7 3.2 8.3 -28.1 -9.7 -14.7 6.9
  Number of Employees 7.4 6.1 4.5 -41.1 -23.8 -8.8 6.8
  Inventories 3.2 -1.6 -5.7 -25.2 -24.0 -16.7 -3.7
Prices Paid Index 32.4 33.2 36.6 -12.2 -3.9 36.3 26.3
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