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Economy in Brief

Philadelphia Fed Nonmanufacturing Business Activity Strengthens to Four-Year High
by Tom Moeller  May 22, 2018

The Federal Reserve Bank of Philadelphia's Nonmanufacturing Business Index of current conditions at the company level increased to 39.5 in May as it improved to the highest level since 2015. Fifty-two percent of respondents reported an increase in current activity while 12% reported a decline.

The expectations index at the company level for May rose to 45.3 from 40.8. It remained down sharply from 62.6 in January.

The new orders index jumped to the highest level since February 2015. The sales or revenue index similarly improved to the highest point since June of last year. The inventories series rebounded m/m and showed the quickest rate of accumulation since January 2017. Working the other way, the unfilled orders index declined to a twelve-month low.

On the labor front, the wages & benefits reading surged to a record high. The number of full-time permanent employees index declined, however, to the lowest level since January after showing strength during the last few months. The index of part-time/temporary employment strengthened m/m but was steady y/y. The average workweek reading increased following a sharp drop in April.

The index for capital spending on equipment and software surged to the highest level since March 2012. The capital expenditures for facilities index declined to the lowest point since November 2016.

The index of prices paid rebounded following a sharp April drop, and continued the upward trend in place since the middle of last year. An increased 34% of respondents paid higher prices while none paid less. The prices received index surged to the highest level since April of last year.

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) May Apr Mar May'17 2017 2016 2015
General Activity - Company 39.5 26.0 27.6 26.0 27.3 19.7 31.3
  New Orders 36.2 12.5 31.9 16.8 19.1 15.7 21.8
  Sales or Revenue 33.7 13.5 24.0 26.2 27.9 16.2 23.8
  Inventories 8.2 0.1 2.3 0.2 3.8 4.4 5.2
  Number of Full-Time Permanent Employees 7.7 15.8 22.6 11.9 14.8 11.7 15.6
  Prices Paid 33.8 26.0 36.7 17.6 21.4 17.5 19.3
  Wage & Benefit Costs 46.4 28.3 40.9 31.0 33.4 31.2 32.5
Expected General Activity - Company 45.3 40.8 54.1 49.4 49.9 43.0 53.8
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