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First Cut: Philadelphia Fed Non-Manufacturing Index for November suggests service sector activity on the upswing

The general business activity index in the Philadelphia Fed’s Non-Manufacturing Business Outlook Survey for November rose to 20.7, moving up for a third straight month and the highest since 21.7 in March. Some of the upswing may be related to new government contracts going into effect in fiscal year 2020, but some is also due to solid new orders for a second month in a row. The index for activity six months from now rebounded to 31.7 in November from 8.7 in October and is back on track with expectation for moderate expansion in the near future.

Driving the improvement was relatively steady and solid new orders with the index at 25.6 in November after 26.9 in October. Unfilled orders increased more rapidly at 12.9 after 3.4 and suggested that not only were a good number of orders coming in, there were enough in the pipeline to smooth out any rough patches. Inventory management continued cautious. The index was up to 1.9 in November after 0.9 in October, an increase that is only marginal.

Sales revenues rose to 33.5 in November after 25.5 in October and were the highest since 37.2 in April.

The November employment indexes indicated that hiring is still taking place, if more unevenly in the short term. Full-time employment was up 21.1 after 15.9 in the prior month, a reading that is more-or-less on trend. Part-time employment was virtually unchanged at 10.1 after 10.8.  Wages and benefits continued to rise at healthy pace at 36.7, not significantly changed from 41.9 in October and in line with the 36.1 in September. The workweek expanded at a trend-like 12.3 in November after 10.8 in October.


The underlying trend for capital expenditure plans remains modest, at best. Plans for investment in plants was 14.9 in November, up from 8.5 in October but an insignificant increase relative to the tone of 2019 to-date.  Plans for expenditures on equipment and software were not much changed at 19.7 after 23.0 in the prior month.

The index for prices paid was up 28.6 in November after 20.5 in October when energy prices helped bring it down from 26.5 in September. Prices received were up slightly at 10.7 after 8.0. Upward price pressures were low and businesses’ pricing power remained limited.

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