by Calculated Risk on 6/19/2008 11:35:00 AM

Here is the Philadelphia Fed Index for June activity released today: Business Outlook Survey.

Note the special question at the bottom on prices. The average expected price change this year is 5.4%!

Click on graph for larger image in new window.

This graph shows the Philly index vs. recessions for the last 40 years. There are a number of times the index was below zero without a recession - so the reading today doesn't mean the economy is in recession. However it is very likely that the economy is already in recession.

From the release, weaker conditions and higher prices :

Indicators Reflect Continued Weakening

The survey’s broadest measure of manufacturing conditions, the diffusion index of current activity, decreased slightly, from -15.6 in May to -17.1 this month. The index has now been negative for seven consecutive months.

More Manufacturers Report Higher Input Prices

A larger share of firms — 72 percent, up from 61 percent in May— reported higher input prices this month. The prices paid index jumped 16 points, to 69.3, its highest reading since November 1980. (see chart)

Outlook Is Less Optimistic

Following significant improvement in expectations over the last two months, the future general activity index retreated in June, falling from a May reading of 28.2 to 21.3. Forty percent of the firms expect growth in activity over the next six months; 18 percent expect a decline.

Special Questions (June 2008) 1. What impact are these recent cost increases having, or expected to have, on the prices of your finished products over the next three months?
We expect price decreases		14.6%
We expect steady prices		20.2%
We expect price increases		65.2%
	Less than 2.5%		4.5%
	Between 2.5-5%		28.1%
	Between 5-7.5%		13.5%
	Between 7.5-10%		11.2%
	Between 10-15%		3.3%
	Greater than 15%		2.3%
	No response		2.3%
Total		100.0%
Average expected price change		5.4%
Average reported price increase* since the beginning of the year:		3.8%
*Firms were asked what increases in prices have already occurred since January.