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Economy in Brief

Philadelphia Fed Nonmanufacturing Business Activity Index Improves
by Tom Moeller  September 25, 2018

The Federal Reserve Bank of Philadelphia reported that its Nonmanufacturing Business Index of current conditions at the company level increased to 46.8 during September, the highest reading since February 2015. A lessened 40 percent of respondents reported an increase in current activity but a fewer three percent reported a decline.

The expectations index for September rose to 53.6, up from a low of 24.3 in January 2016. Sixty-six percent of respondents reported improved expectations while 12 percent indicated a decline.

The component series were mixed. The sales or revenue index increased to the highest level since February 2015, and the inventory index similarly strengthened. The unfilled orders index also improved to the highest level in nine months. Moving down was the new orders series which fell to the lowest level since April.

On the labor front, the number of full-time permanent employees index recorded another record high. Forty-three percent of companies added jobs while six percent indicated reduction. The index of part-time/temporary employment eased slightly. The average workweek reading continued to trend sideways as it rose m/m. The index of wage & benefit costs rose m/m and remained near the record high.

The index of prices paid declined to the lowest level since April, but remained up sharply from its June 2017 low. A lessened 28% of respondents paid higher prices while two percent paid less. The prices received index fell slightly  from its three-year high

The index for capital spending on equipment & software fell sharply for the second month, as the readings backed away from the record high reached in July. The capital expenditures for facilities index eased m/m, but remained up sharply versus the 2015 low.

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) Sep Aug Jul Sep'17 2017 2016 2015
General Activity - Company 46.8 41.1 35.5 26.0 27.3 19.7 31.3
  New Orders 26.7 29.0 31.5 23.6 19.1 15.7 21.8
  Sales or Revenue 42.8 40.5 35.6 28.3 27.9 16.2 23.8
  Inventories 13.9 9.5 5.4 -1.8 3.8 4.4 5.2
  Number of Full-Time Permanent Employees 36.7 32.2 29.5 8.2 14.8 11.7 15.6
  Prices Paid 26.3 27.4 28.6 16.8 21.4 17.5 19.3
  Wage & Benefit Costs 48.1 46.4 47.5 34.0 33.4 31.2 32.5
Expected General Activity - Company 53.6 50.7 41.5 49.3 49.9 43.0 53.8
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