Tuesday, June 4, 2013

Philly Fed Index: Colorado economic growth outpaces nation

The Coincident Index for Colorado rose 1.0 percent over three months from January through April this year, which was above the national index's increase of 0.8 percent. April's index, which was released last month by the Philadelphia Federal Reserve Bank, is an index calculated from nonfarm payroll employment, average hours worked in manufacturing, the unemployment rate, and wage and salary disbursements deflated by the consumer price index (U.S. city average).

The three-month change in the index, shown in the map here, was larger in Colorado (1.0%) than 34 states, but generally speaking, Colorado was about the the middle of the pack when looking at growth rates among states. 

According to the April 2013 report:
The Federal Reserve Bank of Philadelphia has released the coincident indexes for the 50 states for April 2013. In the past month, the indexes increased in 45 states, decreased in four states, and remained stable in one (Minnesota), for a one-month diffusion index of 82. Over the past three months, the indexes increased in 47 states, decreased in two (Wisconsin and Wyoming), and remained stable in one (Alaska), for a three-month diffusion index of 90. For comparison purposes, the Philadelphia Fed has also developed a similar coincident index for the entire United States. The Philadelphia Fed’s U.S. index rose 0.2 percent in April and 0.8 percent over the past three months.
The graph below compares the 3-month change in both the Colorado Index and the US index. April was the 13th month in a row in which the 3-month growth rate was higher in Colorado than the nation overall. 



The second graph shows year-over-year changes in the index, and an upward trend has been evident in both the US and in Colorado since 2011. Colorado's year-over-year growth has exceeded the nation's growth rate since 2012. The YOY change in the coincident index in Colorado was 4.4 percent. Nationwide, it was 2.7 percent. 

In recent months, economists and analysts have concluded that Colorado's economy is better positioned than the nation's to continue growth even if the national economy begins to stall. This latest coincident index would seem to support that thesis. 



The coincident indexes combine four state-level indicators to summarize current economic conditions in a single statistic. The four state-level variables in each coincident index are nonfarm payroll employment, average hours worked in manufacturing, the unemployment rate, and wage and salary disbursements deflated by the consumer price index (U.S. city average). The trend for each state’s index is set to the trend of its gross domestic product (GDP), so long-term growth in the state’s index matches long-term growth in its GDP.