Thursday, December 17, 2009

Philadelphia Feeling: Federal Reserve Bank of Philadelphia Business Outlook Survey December 2009

Today, the Federal Reserve Bank of Philadelphia released the results of their Business Outlook Survey for November showing a continued increase in manufacturing activity with the current activity index still indicating expansion with a reading of 20.4.

It's important to note that although the "future activity" reading continues to indicate expansion with a reading of 24.4, today's results show the fourth consecutive decline indicating that assessments of future manufacturing activity have weakened notably since August.

Also, today’s results show that any recent parallel to the stagflationary eras of the 70s and early 80 which had given way to a stronger stag-deflationary force, and then mildly inflationary inline with the government stimulus now appears to be, at least temporarily, looking marginally double-dipish as latest release shows predictions on future employment flattening.

The following chart shows the latest results of the “current new orders” “current prices paid” and “future employment” components (click for larger versions).

The following chart (click for larger) shows these measures during the last stagflationary era seen between 1976 – 1980. Notice the clear divergence of rising prices and falling growth.