Philly Fed Manufacturing Index: Improving Conditions in September

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 23.8, up from last month's 18.9, and has been positive for fourteen consecutive months. The 3-month moving average came in at 20.7, down from 22.0 last month. Since this is a diffusion index, negative readings indicate contraction, positive ones indicate expansion. The Six-Month Outlook came in at 55.2, an increase from the previous month's 42.3.

Today's 23.8 headline number came in above the 17.2 forecast at Investing.com.

Here is the introduction from the survey released today:

Manufacturing firms reported an improvement in regional manufacturing conditions in September. The survey’s current indicators for general activity, new orders, and shipments increased this month and suggest a broadening of growth. Price pressures also picked up, according to the reporting firms. The survey’s future indicators suggest that manufacturers have generally grown more optimistic over the past three 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. 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.