Philly Fed Manufacturing Index: Activity Continued to Decline in November
The Philly Fed's Manufacturing Business Outlook Survey is a monthly survey of about 250 manufacturers in the Third Federal Reserve District, which covers eastern Pennsylvania, southern New Jersey, and Delaware. Participants of the survey indicate the relative level of general business conditions in the region. Since this is a diffusion index, negative readings indicate contraction, positive ones indicate expansion. While it focuses exclusively on business in this district, this regional survey gives a reliable direction of the broader Chicago Fed's National Activity Index.
The latest Philadelphia Fed manufacturing index rose this month but remained in negative territory for the 3rd straight month, indicating a continued decline overall. In November, the index increased to -5.9, coming in above the forecast of -9.0.
Here is the introduction from the survey:
Manufacturing activity in the region continued to decline overall, according to the firms responding to the November Manufacturing Business Outlook Survey. The survey’s indicator for general activity rose but remained negative. The indicator for shipments turned negative, while the indicator for new orders was positive but low. The employment index suggests steady employment overall, and both price indexes indicate overall increases in prices. The future indicators suggest that firms’ expectations for growth over the next six months remain subdued. (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 three 21st century recessions. The green dots show the indicator itself, which is quite noisy, while the purple line represents the three-month moving average, which is more useful as an indicator of coincident economic activity. We can see longer and deeper periods of contraction during each of the recessions with shallower contractions in '02, '03, '11, '12, '13, and '15.
In the latest report the index remained in negative territory for a 3rd straight month. This is the index’s 16th negative reading in the past 18 months, more closely resembling those periods during recessions.
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 8.0.
The next chart is an overlay of the General Activity Index and the Future General Activity Index — the outlook six months ahead. The six-month outlook fell to -2.1, its first negative reading in 6 months.
Future Indicators Soften
The diffusion index for future general activity fell from 9.2 in October to -2.1 in November, its first negative reading since May (see Chart). The share of firms expecting decreases in activity over the next six months (30 percent) narrowly exceeded the share expecting increases (28 percent); 38 percent expect no change. The future new orders index decreased 8 points to 11.3, while the future shipments index increased 11 points to 16.3. The firms continued to expect overall increases in employment over the next six months, but the future employment index declined 4 points to 4.3. The future capital expenditures index rose but remained negative at -1.3.
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 2004 (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.
Here are the remaining four monthly manufacturing indicators that we track:
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