The Philly Fed ADS Business Conditions Index Update
We've updated our periodic look at the Philly Fed ADS Index which includes real GDP (Q2 2023 second estimate), real personal income less transfer receipts (for July 2023) and initial jobless claims through 8/26.
Philly Fed ADS Background
The Philly Fed's Aruoba-Diebold-Scotti Business Conditions Index (hereafter the ADS index) is a fascinating but relatively little-known real-time indicator of business conditions for the U.S. economy, not just the Third Federal Reserve District, which covers eastern Pennsylvania, southern New Jersey, and Delaware. Thus it is comparable to the better-known Chicago Fed's National Activity Index (more about the comparison below).
Named for the three economists who devised it, the index, as described on its home page, "is designed to track real business conditions at high frequency."
The index is based on six underlying data series:
- Weekly initial jobless claims
- Monthly payroll employment
- Industrial production
- Personal income less transfer payments
- Manufacturing and trade sales
- Quarterly real GDP
The accompanying commentary goes on to explain that "The average value of the ADS index is zero. Progressively bigger positive values indicate progressively better-than-average conditions, whereas progressively more negative values indicate progressively worse-than-average conditions."