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Philly Fed Business Outlook: General Activity Index Goes Negative

September 17, 2015

by Jill Mislinski

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. While it focuses exclusively on business in this district, this regional survey gives a generally reliable clue as to direction of the broader Chicago Fed's National Activity Index.

The latest gauge of General Activity came in at -6.0, down significantly from last month's 8.3. The 3-month moving average came in at 2.7, down from 9.7 last month. Since this is a diffusion index, negative readings indicate contraction, positive ones indicate expansion. The Six-Month Outlook was up at 44.0, versus the previous month's 43.1.

Today's -6.0 came in well below the 6.0 forecast at

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

Manufacturing conditions in the region were mixed in September, according to firms responding to this month’s Manufacturing Business Outlook Survey. The indicator for general activity fell into negative territory, but indicators for new orders, shipments, and employment remained positive. Evidence suggests that the responses regarding general activity that were received earlier in the month may have been negatively affected by the volatility in the stock market and international news reports. Firms reported essentially unchanged prices for raw materials and other inputs in September and slight declines in prices for their own products. The survey’s indicators of future activity remained near their readings in August, indicating that firms expect a continuation of growth in the manufacturing sector over the next six months. (Full Report)

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.

In the next chart we see the complete series, which dates from May 1960. For proof of the high volatility of the headline indicator, note that the average absolute monthly change across this data series is 7.7.

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

For comparison, here is the latest ISM Manufacturing survey.

Let's compare all five Regional Manufacturing indicators.Here is a three-month moving average overlay of each since 2001 (for those with data).

Here is the same chart including the average of the five. Readers will notice the range in expansion and contraction between all regions - this averages out to approximately zero for the average, which is flat and neither expanding nor contracting.

Here are the remaining four monthly manufacturing indicators that we track:

Texas Manufacturing Outlook Survey (TMOS)

Kansas City Manufacturing Survey

Empire State Manufacturing Survey

Fifth District Manufacturing Survey (Richmond)

Regional Fed Overview