Philly Fed Business Outlook: Continued Modest Growth

February 19, 2015

by Doug Short

The Philly Fed's Business Outlook Survey is a monthly report for the Third Federal Reserve District, covers eastern Pennsylvania, southern New Jersey, and Delaware.

The latest gauge of General Activity came in at 5.2, a decline from last month's 6.3 and the lowest reading since the -2.0 contraction in February of last year. The 3-month moving average came in at 11.9, down from 23.6 last month. Since this is a diffusion index, negative readings indicate contraction, positive ones indicate expansion. The Six-Month Outlook was essentially unchanged at 29.7 versus the previous month's 50.9.

Here is the introduction from the Business Outlook Survey released today:

Firms responding to the Manufacturing Business Outlook Survey indicated continued modest growth in the region’s manufacturing sector in February. Although the current activity index fell for the third consecutive month, it remained positive, and the employment indicator increased from its reading last month. The survey’s future activity index also fell but continues to reflect general optimism about manufacturing growth in the region over the next six months. (Full PDF Report)

Today's 5.2 came in below the 9.3 forecast at Investing.com.

The first chart below gives us a look at this diffusion index since 2000, which shows us how it has behaved in proximity to the two 21st century recessions. The red dots show the indicator itself, which is quite noisy, and the 3-month moving average, which is more useful as an indicator of coincident economic activity. We can see periods of contraction in 2011 and 2012 and a shallower contraction in 2013. The indicator is now above its post-contraction peak in September of last year.

Click to View
Click for a larger image

In the next chart we see the complete series, which dates from May 1960. The average absolute monthly change across this data series is 7.8, which shows that the 18 point change from last month is a an outlier.

Click to View
Click for a larger image

The next chart is an overlay of the General Activity Index and the Future General Activity Index — the outlook six months ahead.

Click to View
Click for a larger image

Note from Doug: Having lived for two wonderful years in Paoli, PA, a suburb west of Philadelphia just south of Valley Forge, I have a special interest in this regional indicator. But, more importantly, it gives a generally reliable clue as to direction of the broader Chicago Fed's National Activity Index.


Website by the Boston Web Company