Philly Fed Business Outlook: Another Month of Modest Growth

April 16, 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 7.5, up from last month's 5.0. The 3-month moving average came in at 5.9, little changed from 5.5 last month. Since this is a diffusion index, negative readings indicate contraction, positive ones indicate expansion. The Six-Month Outlook was little unchanged at 35.5 versus the previous month's 32.0.

Today's 7.5 came in above the 6.0 forecast at Investing.com.

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

Manufacturing activity in the region increased modestly in April, according to firms responding to this month's Manufacturing Business Outlook Survey. Indicators for general activity and new orders were positive but remained at low readings. Firms reported overall declines in shipments this month, but employment and work hours increased at the reporting firms. Firms reported continued price reductions in April, with indicators for prices of inputs and the firms' own products remaining negative. The survey's indicators of future activity suggest a continuation of modest growth in the manufacturing sector over the next six months (Full PDF 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.

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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.

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

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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.


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