Philly Fed Manufacturing Index: Firms Continue to Expect Growth

The Philly Fed's Manufacturing 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 the direction of the broader Chicago Fed's National Activity Index.

The latest Manufacturing Index came in at 27.6, down from last month's 38.8 and has been positive for eleven consecutive months. The 3-month moving average came in at 29.5, down from 31.2 last month. Since this is a diffusion index, negative readings indicate contraction, positive ones indicate expansion. The Six-Month Outlook came in at 31.3, a decline from the previous month's 34.8.

Today's 27.6 headline number came in above the 24.0 forecast at Investing.com.

Here is the introduction from the survey released today:

Regional manufacturing continues to expand, according to results from the June Manufacturing Business Outlook Survey. The diffusion index for general activity fell from its reading in May but remained positive and continued to reflect growth. Although many of the future indicators also declined, firms continue to expect growth over the next six months. About one-third of the firms expect to add to their payrolls through the end of the year. (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. 2015 saw a contraction with an improvement in 2016.

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.