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 showed weak activity this month. The index was unchanged at -4.0, marking the third straight negative reading. The latest reading was worse than the forecast of -1.7.
Here is the summary from the survey:
Manufacturing activity in the region remained weak, according to the firms responding to the June Manufacturing Business Outlook Survey. The survey’s indicator for current general activity remained slightly negative, unchanged from May. The new orders index fell but remained positive, and the shipments index improved, turning positive; both readings remain below their nonrecession averages. The employment index turned negative and fell to its lowest value since May 2020. Both price indexes moderated but remain elevated. The survey’s future indicators suggest less widespread expectations for growth over the next six months.
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. Therefore, we've included the three-month moving average (purple line), 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. Most recently, the index's 3-month moving average contracted from July 2022 to December 2023 however no recession was called during that time.
In the latest report, the 3-month moving average reached its lowest level since November 2023.
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 8.2.
The next chart is an overlay of the General Activity Index and the Future General Activity Index — the outlook six months ahead.
Expectations for Growth Are Less Widespread
The diffusion index for future general activity fell 29 points to 18.3 in June after rising 40 points last month (see Chart 1). The share of firms expecting increases in activity over the next six months (45 percent) exceeded the share expecting decreases (27 percent); 19 percent expect no change. Similarly, the future new orders index dropped 28 points to 22.1, and the shipments index fell 23 points to 27.9. The firms continue to expect overall increases in employment, and the future employment index edged up from 23.0 to 24.6. The future capital expenditures index fell 13 points to 14.5.
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).
