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Economy in Brief

Philadelphia Fed Nonmanufacturing Business Conditions Soften
by Tom Moeller  October 24, 2017

The Federal Reserve Bank of Philadelphia's Nonmanufacturing Business Index of current conditions at the company level in October slipped to 24.7 from 25.7 during September. The index remained down versus the February high of 38.0. Forty-two percent of respondents reported an increase in current activity while 17% reported less. The expectations index at the company level for October declined to 38.0, down from 68.3 in January. It was at the lowest level sine February of last year.

The new orders index declined m/m, and was well low its April level. Sales or revenue eased, but remained below January. Unfilled orders similarly fell, but inventories exhibited modest improvement. The number of full-time permanent employees increased sharply m/m and returned to the level averaged earlier in the year. The index of part-time/temporary employment improved moderately. The average workweek reading declined sharply to the lowest level in twelve months. Capital expenditures on facilities improved, while spending on equipment and software surged.

The index of prices paid strengthened to the highest level in six months following extreme volatility earlier this year. Twenty-eight percent of respondents paid higher prices while close to none paid less. The prices received index strengthened while the wages and benefits index also improved.

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) Oct Sept Aug Oct'16 2016 2015 2014
General Activity - Company 24.7 25.7 30.7 17.4 19.7 31.3 38.7
  New Orders 11.4 26.7 19.4 8.2 15.6 21.7 27.9
  Sales or Revenue 25.5 29.3 24.5 9.1 16.1 23.6 30.2
  Inventories 0.6 -3.4 3.3 6.7 4.4 5.2 5.8
  Number of Full-Time Permanent Employees 17.3 3.8 3.1 9.3 11.7 15.5 17.3
  Prices Paid 28.3 14.9 22.7 15.3 17.5 19.2 19.7
  Wage & Benefit Costs 40.1 34.0 35.9 39.5 31.2 32.5 33.1
Expected General Activity - Company 38.0 49.3 44.9 38.7 42.9 53.8 59.9
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