Global| Oct 19 2017Philadelphia Fed Factory Conditions Index Improves Again
by:Tom Moeller
|in:Economy in Brief
Summary
The Philadelphia Federal Reserve reported that its General Factory Sector Business Conditions Index for October increased to 27.9 after a rise to 23.8 during September. The figure remained up sharply versus the 2015 low and compared [...]
The Philadelphia Federal Reserve reported that its General Factory Sector Business Conditions Index for October increased to 27.9 after a rise to 23.8 during September. The figure remained up sharply versus the 2015 low and compared to expectations for 20.7 in the Action Economics Forecast Survey. Thirty-nine percent of firms reported an improvement in business activity and 39% also reported deterioration.
The ISM-Adjusted General Business Conditions Index constructed by Haver Analytics rose to 59.8 this month, a seven-month high. 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.
The increase in the overall current conditions index reflected mixed performance amongst the component series. The delivery time and inventory series rose. The new orders, shipments and unfilled orders indicators each fell.
The employment series surged to a record high. Thirty-one percent of respondents raised job levels while none lowered them. During the last ten years, there has been a 74% correlation between the jobs index and the m/m change in manufacturing sector payrolls. The average workweek reading also gained to the highest level since June.
The prices paid measure strengthened to the highest point since March. Forty percent of respondents (NSA) reported paying higher prices, while two percent paid less. The prices received index eased and has moved sideways since November.
The index measuring expected business conditions in six months declined and gave up most of its September rise. That reflected lower readings for new orders, shipments, delivery times and inventories. The employment reading increased to its long-term high and the workweek figure strengthened. The reading of future capital expenditures eased m/m but was up sharply y/y.
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.
| Philadelphia Fed - Manufacturing Business Outlook Survey (%, SA) | Oct | Sep | Aug | Oct'16 | 2016 | 2015 | 2014 |
|---|---|---|---|---|---|---|---|
| General Factory Sector Business Conditions | 27.9 | 23.8 | 18.9 | 11.1 | 4.8 | 3.6 | 18.3 |
| ISM-Adjusted Business Conditions | 59.8 | 57.9 | 55.2 | 46.1 | 48.2 | 49.4 | 53.7 |
| New Orders | 19.6 | 29.5 | 20.4 | 17.3 | 4.9 | 3.0 | 14.9 |
| Shipments | 24.4 | 37.8 | 29.4 | 13.5 | 6.9 | 3.1 | 16.3 |
| Unfilled Orders | 10.9 | 17.0 | 14.5 | -0.7 | -5.5 | -5.1 | 3.3 |
| Delivery Time | 21.6 | 14.5 | 10.5 | -0.7 | -4.6 | -4.1 | 0.6 |
| Inventories | 6.0 | -1.4 | -6.1 | -0.4 | -9.7 | -1.5 | 1.7 |
| Number of Employees | 30.6 | 6.6 | 10.1 | -4.1 | -5.7 | 3.9 | 10.5 |
| Average Workweek | 19.4 | 11.9 | 18.8 | -1.7 | -5.5 | -1.8 | 3.9 |
| Prices Paid | 38.1 | 34.4 | 21.1 | 8.9 | 13.5 | 1.5 | 21.6 |
| Expectations - General Business Conditions; Six Months Ahead | 46.4 | 55.2 | 42.3 | 35.7 | 33.7 | 37.4 | 47.6 |
Tom Moeller
AuthorMore in Author Profile »Prior to joining Haver Analytics in 2000, Mr. Moeller worked as the Economist at Chancellor Capital Management from 1985 to 1999. There, he developed comprehensive economic forecasts and interpreted economic data for equity and fixed income portfolio managers. Also at Chancellor, Mr. Moeller worked as an equity analyst and was responsible for researching and rating companies in the economically sensitive automobile and housing industries for investment in Chancellor’s equity portfolio. Prior to joining Chancellor, Mr. Moeller was an Economist at Citibank from 1979 to 1984. He also analyzed pricing behavior in the metals industry for the Council on Wage and Price Stability in Washington, D.C. In 1999, Mr. Moeller received the award for most accurate forecast from the Forecasters' Club of New York. From 1990 to 1992 he was President of the New York Association for Business Economists. Mr. Moeller earned an M.B.A. in Finance from Fordham University, where he graduated in 1987. He holds a Bachelor of Arts in Economics from George Washington University.
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