Courtesy of Doug Short.
Note from Doug: Having lived for two years in a 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.
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. Here is the introduction from the Business Outlook Survey released today:
Responses from manufacturing firms polled for this month’s Business Outlook Survey suggest that regional manufacturing activity continued to expand in February. The survey’s broad indicators for general activity, new orders, and shipments all increased from their readings in January. Firms reported near-steady employment levels but an increase in average work hours. More firms reported higher input prices this month, and a sizable share of firms reported price increases for their own manufactured goods. The survey’s broad indicators of future activity fell from levels in recent months but continue to reflect optimism about future manufacturing growth. (Full PDF Report)
The first chart below is based on the complete historical series for general activity dating from May 1968 with recessions highlighted.
In the next chart, the red dots show the indicator itself, which is quite noisy, and the 3-month moving average which is more useful as a indicator of coincident economic activity. The average absolute monthly change across this data series is 8.0, which suggests that the 2.9 point change from last month has relatively minor statistical significance.
The next chart is an overlay starting in 2000 of the General Activity Index and the Future General Activity Index — the outlook six months ahead. The decline in the latest future outlook from last month’s 49.0 to the current 33.3 is somewhat concerning, and larger than the 7.5 average absolute monthly change across its history.
The Philly Fed General Activity Index continues to be a key indicator to watch closely.
