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Bank Publishes Business Conditions Index

For immediate release
Contact: Katherine Dibling, senior media representative, (215) 574-4119

Philadelphia, Pa. - The Federal Reserve Bank of Philadelphia's Real-Time Data Research Center will now publish a business conditions index that summarizes a number of key economic indicators. The index may prove helpful in determining the state of the economy.

Designed to track real macroeconomic activity on a high-frequency basis, the ADS business conditions index will be calculated and updated at least once a week, as data on its underlying components are released. The indicators that underlie the ADS index, which are released by the U.S. government, include weekly initial jobless claims; monthly payroll employment, industrial production, personal income (less transfer payments), and manufacturing and trade sales; and quarterly real GDP.

The ADS business conditions index is the work of economists S. Borağan Aruoba (University of Maryland), Francis X. Diebold (University of Pennsylvania), and Chiara Scotti (Federal Reserve Board). Their paper "Real-Time Measurement of Business Conditions," PDF which will soon be published in the Journal of Business and Economic Statistics, is the basis of the ADS index, with some modifications. The index will be maintained by the Real-Time Data Research Center, with input from the authors.

According to Francis X. Diebold and Borağan Aruoba, visiting scholars at the Real-Time Data Research Center, "Historically the ADS index tracks the NBER business cycle chronology closely, increasing during expansions and decreasing during recessions. Recently the ADS index displays a clear and sustained decline starting in mid-2007. The large drop in September 2008 (due to deleterious effects of two major hurricanes and a strike at a large aircraft manufacturer) is anomalous and should therefore be discounted, but the overall recent trend is nevertheless distinctly downward. Today's release of weak December payroll employment data, as well as downward revisions to October and November employment, produced today's large downward revisions to the ADS index during December as well as smaller downward revisions in October and November. As additional data are released, we expect additional revisions."

"This index will provide an up-to-date overall evaluation of the economy. This is the first of a number of planned key macroeconomic indicators that the Real-Time Data Research Center will maintain to help inform policymakers and the public about economic conditions," said Dean Croushore, interim director of the Real-Time Data Research Center.

The Real-Time Data Research Center is part of the Federal Reserve Bank of Philadelphia's Research Department. The center is a source of knowledge and expertise about real-time macroeconomic data, surveys of macroeconomic forecasts, and macroeconomic modeling. The center produces macroeconometric analyses and collects and maintains a variety of data sets of value to macroeconomists and monetary policymakers, including the real-time data set for macroeconomists, the Livingston Survey, the Survey of Professional Forecasters, and the Greenbook data sets.

The Federal Reserve Bank of Philadelphia helps formulate and implement monetary policy, supervises banks and bank holding companies, and provides financial services to depository institutions and the federal government. One of the 12 regional Reserve Banks that, together with the Board of Governors in Washington, D.C., make up the Federal Reserve System, the Philadelphia Federal Reserve Bank serves eastern Pennsylvania, southern New Jersey, and Delaware.

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