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Philly Fed Survey: Fifth Month Of Contraction

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    September 23, 2012

    The Philly Fed’s Business Outlook Survey is a monthly report for the Third Federal Reserve District, covers eastern Pennsylvania, southern New Jersey, and Delaware. Today’s report shows the fifth consecutive negative reading in General Activity after seven months of positive data, although the latest reading at -1.9 is a continuation of a less negative trend. Since this is a diffusion index, negative readings indicate contraction, but the rate that has been slowing since the recent trough of -16.6 in June. Here is the introduction from the Business Outlook Survey released today:

     

    Firms responding to the September Business Outlook Survey reported nearly flat business activity this month. The survey’s indicators for general activity and new orders both improved from last month but recorded levels near zero. Firms reported continuing declines in shipments, employment, and hours worked. Indicators for the firms’ expectations over the next six months, however, improved notably this month, although the same firms forecast continued deceleration in production growth in the fourth quarter. (Full PDF Report)

     


    The first chart below gives us a look at this diffusion index since 2000, which shows us how it has behaved in proximity to the two 21st century recessions. The red dots show the indicator itself, which is quite noisy, and the 3-month moving average, which is more useful as a indicator of coincident economic activity.

     

     

    In the next chart we see the complete series, which dates from May 1960. The average absolute monthly change across this data series is 7.9, which suggests that the 5.2 point change from last month is not highly significant, an observation that supports the value of the 3-month moving average.

     

     

    The next chart is an overlay starting in 2000 of the General Activity Index and the Future General Activity Index — the outlook six months ahead. The latest Future reading has shown a substantial surge from the level of the past two months.

     

     

    The Philly Fed General Activity Index continues to be a key indicator to watch closely.

     

    Images: Flickr (licence attribution)

    About The Author

    My original dshort.com website was launched in February 2005 using a domain name based on my real name, Doug Short. I’m a formerly retired first wave boomer with a Ph.D. in English from Duke. Now my website has been acquired byAdvisor Perspectives, where I have been appointed the Vice President of Research.

    My first career was a faculty position at North Carolina State University, where I achieved the rank of Full Professor in 1983. During the early ’80s I got hooked on academic uses of microcomputers for research and instruction. In 1983, I co-directed the Sixth International Conference on Computers and the Humanities. An IBM executive who attended the conference made me a job offer I couldn’t refuse.

    Thus began my new career as a Higher Education Consultant for IBM — an ambassador for Information Technology to major universities around the country. After 12 years with Big Blue, I grew tired of the constant travel and left for a series of IT management positions in the Research Triangle area of North Carolina. I concluded my IT career managing the group responsible for email and research databases at GlaxoSmithKline until my retirement in 2006.

    Contrary to what many visitors assume based on my last name, I’m not a bearish short seller. It’s true that some of my content has been a bit pessimistic in recent years. But I believe this is a result of economic realities and not a personal bias. For the record, my efforts to educate others about bear markets date from November 2007, as this Motley Fool article attests.
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