Most Recent Monthly Values

The chart below shows the most recent monthly values through September 2009 for the GPCI (blue bars) and the 12-month moving average (orange line).

Recent Trends in the Greater Philadelphia Coincident Index

In September 2009 the GPCI fell to 93.4, the 20th month-over-month (m/m) decline in the last 21 months. The Coincident Index starting declining on a year-over-year (y/y) basis in May 2008. As shown above, the m/m changes decreased in April and May following the sharp declines in February and March, and have become more gradual since the sharp drop between May and June, again suggesting that GPR's economy is nearing its trough. As shown in the chart above, the GPCI has remained below its 12-month moving average since October 2008, indicating that the Philadelphia region's economy has continued to decline in response to the weakness of the US economy.

A comparison of the 12-month moving averages shows that the U.S. Coincident Index has been declining more rapidly than the GPCI since late in 2007, indicating the U.S. economy has been contracting more rapidly than the Philadelphia economy. However, in the last few months this differential has narrowed.

The current recession was determined by the National Bureau of Economic Research (NBER) to have started in December 2007, so that September 2009, if we were still in the recession, would be its 22nd month, making it the longest recession of the post WWII period.

Precisely predicting the turning point of a recession is the greatest challenge of a leading indicator for a regional economy. Select and IHS Global Insight cannot conclude that the GPR's economy is recovering until we have several months of increasing values for the Coincident Index. The Winter 2010 release will hopefully show this upward trend.

Trends During the Last 12 Months

As with the GPLI, in order accurately interpret the most recent month-to-month changes in the GPCI, it is helpful to examine the trend in its 12-month moving average. An occasional month of downward movement in the value of the GPCI does not indicate a recession or even deteriorating economic conditions, nor does an occasional month of upward movement suggest that economic conditions are improving. When the GPGICI has been consistently above its moving average, the economy is currently expanding; when it has been consistently below its 12-month moving average, the economy is experiencing a downturn. As shown in the chart above, the current monthly values of the GPCI have been below its 12-month moving average over the last year, although the magnitude of the difference has narrowed slightly in the most recent few months.

Methodology

Global Insight was also retained to construct a Coincident Index for the GPR that shows the current direction of economic activity. For the U.S. economy, economic variables that serve as coincident indicators include, among others: employment in non-basic sectors such as trade, personal income excluding transfer payments, total employment, tax collections, passenger trips, retail sales, and even hotel occupancy rates.

The GPCI is intended to gauge the current level of economic activity in the GPR. When it displays a sustained upward trend, the Region's economy is said to be growing; on the other hand, a sustained downward trend in the GPCI indicates a recessionary environment and declining rate of economic growth.

A coincident index requires the use of high frequency, timely data that have historically moved in conjunction with the business cycles. Global Insight used private sector employment data provided by the Bureau of Labor Statistics (BLS), available with just a one month lag for the MSA. The resulting series was converted to an index with a base year of 2000.