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Economy in Brief

Philadelphia Fed Business Conditions Index Remains Negative
by Tom Moeller  May 19, 2016

The Philadelphia Federal Reserve reported that its General Factory Sector Business Conditions Index eased during May to -1.8 from an unrevised -1.6 in April. The decline compared to expectations for 3.0 in the Action Economics Forecast Survey.

The ISM-adjusted General Business Conditions Index constructed by Haver Analytics improved to 47.6 from 43.1. The ISM-adjusted headline index is the average of five diffusion indexes, new orders, shipments, employment, supplier deliveries and inventories with equal weights (20% each). This figure is comparable to the ISM Composite Index. During the last ten years, there has been a 71% correlation between the adjusted Philadelphia Fed Index and real GDP growth.

Deterioration in Philadelphia Fed index was less than in the Empire State reading, released earlier this week. The shipments index improved to -0.5 following sharp deterioration in April. Employment similarly became much less negative. During the last ten years, there has been an 81% correlation between the jobs index and the m/m change in manufacturing payrolls. Inventories also were less negative. To the downside was the new orders series posting the first negative reading in three months. The delivery times series showed more slack in the system.

On the pricing front, the prices paid index added to its April improvement, and rose to the highest level since October 2014. Twenty-four percent of respondents paid higher prices, while 8% paid less. The prices received measure also increased sharply to the highest level since October 2014.

The future business activity index eased following its sharp April improvement. Each of the component series fell except the workweek & capital spending.

The survey panel consists of 150 manufacturing companies in Federal Reserve District III (consisting of southeastern PA, southern NJ and Delaware.) The diffusion indexes represent the percentage of respondents indicating an increase minus the percentage indicating a decrease in activity. The ISM adjusted figure, calculated by Haver Analytics, is the average of five diffusion indexes, new orders, production, employment, supplier deliveries and inventories with equal weights (20% each). Each diffusion index is the sum of the percent responding "higher" and one-half of the percent responding "same."

The figures from the Philadelphia Federal Reserve can be found in Haver's SURVEYS database. The Action Economics figure is available in AS1REPNA.

U.S. Economy in a Snapshot from William C. Dudley, President & CEO, Federal Reserve Bank of New York is available here.

Philadelphia Fed - Manufacturing Business Outlook Survey (%, SA) May Apr Mar May'15 2015 2014 2013
ISM-Adjusted General Business Conditions 47.6 43.1 51.7 51.3 49.4 53.7 50.0
General Factory Sector Business Conditions -1.8 -1.6 12.4 8.1 3.6 18.3 6.1
  New Orders -1.9 0.0 15.7 5.5 2.9 14.9 7.2
  Shipments -0.5 -10.8 22.1 5.2 3.0 16.1 6.8
  Unfilled Orders -8.8 -6.3 -1.9 0.1 -5.1 3.3 -3.9
  Delivery Time -14.6 -9.9 0.3 -3.6 -4.1 0.6 -4.1
  Inventories -2.5 -20.5 -12.7 0.5 -1.5 1.7 -3.5
  Number of Employees -3.3 -18.5 -1.1 7.8 3.9 10.5 1.4
  Prices Paid 15.7 13.2 -0.9 12.0 1.5 21.6 16.4
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