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Economy in Brief

Philadelphia Fed Nonmanufacturing Business Activity Indexes Rise Further; Prices Strengthen
by Tom Moeller  June 26, 2018

The Federal Reserve Bank of Philadelphia's Nonmanufacturing Business Index of current conditions at the company level increased to 40.7 in June, the highest level in three years. Fifty-six percent of respondents reported an increase in current activity while 15% reported a decline.

The expectations index at the company level for June surged to 58.2 from 45.3. It remained down, however, versus 62.6 in January.

On the labor front, the wage & benefit cost index surged to a record high as 53% of respondents reported paying higher wages and two percent reported a decline. The number of full-time permanent employees index increased sharply to the highest level in three months after falling sharply in May. The index of part-time/temporary employment strengthened m/m to the highest point since September 2015. The average workweek reading eased following a sharp increase in May.

The index of prices paid increased sharply and roughly equaled the record high. An increased 39% of respondents paid higher prices while two percent paid less. The prices received index surged and approximated the record high.

The new orders index was fairly steady at the highest level since February 2015. The sales or revenue index declined, however, to a three-month low and the inventories also fell. The unfilled orders index declined to the lowest level since February of last year.

The index for capital spending on equipment and software remained near the highest level since March 2012. The capital expenditures for facilities index improved slightly following its May decline to the lowest point since November 2016.

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) Jun May Apr Jun'17 2017 2016 2015
General Activity - Company 40.7 39.5 26.0 27.5 27.3 19.7 31.3
  New Orders 35.5 36.2 12.5 19.6 19.1 15.7 21.8
  Sales or Revenue 24.6 33.7 13.5 35.0 27.9 16.2 23.8
  Inventories 5.1 8.2 0.1 6.9 3.8 4.4 5.2
  Number of Full-Time Permanent Employees 19.9 7.7 15.8 18.2 14.8 11.7 15.6
  Prices Paid 36.6 33.8 26.0 10.4 21.4 17.5 19.3
  Wage & Benefit Costs 51.1 46.4 28.3 26.4 33.4 31.2 32.5
Expected General Activity - Company 58.2 45.3 40.8 49.4 49.9 43.0 53.8
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