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Economy in Brief

Philadelphia Fed Index of Nonmanufacturing Business Activity Steadies Below Earlier Highs
by Tom Moeller  August 23, 2016

The Federal Reserve Bank of Philadelphia reported that its August Index of Nonmanufacturing Sector Activity at the company level remained stable. The index level of 19.5 has been little changed for six months. It remains down sharply, however, versus early last year. The expectations index for general activity also has been erratically moving sideways. These diffusion indexes are seasonally adjusted.

The new orders and sales components remained below their 2015 levels. The inventories series fell sharply, however, showing decumulation for the first time since July of last year. Order backlogs also deteriorated.

Hiring also has been lackluster. Even though the full-time permanent employee index rose m/m, it was well below last year's highs. Part-time employment, conversely, has been improving. The wage & benefit cost index has been moving sideways since early last year at levels below the 2014 highs.

The index of prices paid fell sharply to half the levels of the prior three months. Seventeen percent of respondents reported higher prices paid while six percent paid less. The index of prices received also moved sideways, but remained well below earlier highs.

The expectations index for company business in six months was little changed m/m, well below last year's highs.

The Philadelphia Fed figures are diffusion indexes which are calculated by subtracting the percent of respondents reporting poorer business conditions from those reporting improvement. Thus, they have a good correlation with growth in the series covered. The data is available in Haver's SURVEYS database.

Federal Reserve Bank of Philadelphia: Nonmanufacturing Business Outlook Survey (Diffusion Index, SA) Aug Jul Jun Aug'15 2015 2014 2013
General Activity - Company 19.5 20.3 17.6 28.0 31.4 38.8 29.8
  New Orders 14.7 29.6 9.4 22.5 21.7 27.9 20.2
  Sales or Revenue 22.5 22.2 15.0 27.1 23.6 30.2 27.0
  Inventories -4.2 6.7 0.6 4.3 5.2 5.8 3.0
  Number of Full-Time Permanent Employees 10.0 1.9 18.3 19.0 15.6 17.3 18.8
  Prices Paid 10.6 23.3 25.7 23.8 19.3 19.7 20.6
Expected General Activity - Company 43.7 46.3 36.7 71.1 54.0 60.1 47.4
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