Thursday, June 18, 2009

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

Today, the Federal Reserve Bank of Philadelphia released the results of their Business Outlook Survey for June showing significant improvement to the regions manufacturing sector with the current activity index indicating only mild continued contraction at –2.2.

This is another strong indicator currently favoring the “Green Shoots” position though as with today’s index of leading economic indicators, the intensity of the “V” should be monitored closely in coming months in order to establish the fundamental trend.

It’s important to note that with today’s release the future general activity index has pushed up near the high set during the strongest portion of the last economic “expansion” clearly indicating that respondents on the whole see a strong recovery in the works.

Is this and accurate take or just a significant bounce from a sense of relief that the events of Q4 2008 are now behind us?

Also, today’s results now show that any recent parallel to the stagflationary eras of the 70s and early 80 have given way to a stronger stag-deflationary force bringing down prices and new orders though the latest release shows predictions on future employment appear to have taken a turn up.

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.