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Economy in Brief

Philadelphia Fed Index: Rate of Business Expansion Slows
by Tom Moeller June 18, 2010

According to the Philadelphia Federal Reserve Bank, the economic recovery continued this month but its rate of expansion slowed. The Bank's June index of regional factory sector activity slipped to 8.0 from 21.4 during May. The latest was well short of expectations for a reading of 20.0 and it was the lowest figure since last August. Nevertheless, it 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.

Accompanying the deterioration in the General Activity Index were weaker shipments and much weaker employment & hours readings. 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 fell sharply to the lowest level since last August. 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 improved modestly m/m but remained well below its earlier high. Expected prices paid also fell to the lowest level since last August. In addition, expected capital expenditures were down m/m to the lowest since September and remained well below the February high.

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

Remarks on "The Squam Lake Report: Fixing the Financial System" by Federal Reserve Chairman Ben S. Bernanke can be found here.


Philadelphia Fed (%) June May April June '09 2009 2008 2007
General Activity Index 8.0 21.4 20.2 -5.0 -7.6 -21.4 5.0
New Orders 9.0 6.1 13.9 -8.8 -9.7 -14.7 6.9
Shipments 14.2 15.8 5.6 -0.2 -8.0 -9.2 9.9
Delivery Times 6.8 -1.2 5.4 -18.5 -15.3 -10.6 -6.1
Number of Employees -1.5 3.2 7.3 -24.1 -23.8 -8.8 6.8
Inventories 4.6 -7.9 2.0 -18.0 -24.0 -16.7 -3.7
Prices Paid Index 10.0 35.5 42.7 -17.4 -3.9 36.3 26.3
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