The Philadelphia 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 activity rebounded in June, with the index rising 10.7 points to 10.3. The latest reading marks the fifth positive reading in the past six months and was better than the forecast of 9.8.
Here is the summary from the survey:
Manufacturing activity in the region expanded overall, according to the firms responding to the June Manufacturing Business Outlook Survey. The survey’s indicators for general activity and new orders rebounded into positive territory this month. The shipments index moved higher. The employment index also returned to positive territory, although most firms continued to report no changes in employment overall. The prices paid index rose this month, while the prices received index moved down. The firms continue to expect overall 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. More 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 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.
Firms Continue to Expect Growth
The diffusion index for future general activity declined 3 points to 50.2 this month (see Chart 1). More than 61 percent of the firms expect an increase in activity over the next six months, 11 percent expect a decrease, and 16 percent expect no change. The future new orders index rose 7 points to 60.8, and the future shipments index jumped 15 points to 60.3; both indexes are at five-year highs. The firms continue to expect increases in employment over the next six months, as the future employment index remained elevated at 30.8. The future price indexes moved in different directions but remained above their respective long-run averages: The future prices paid index fell from 70.0 to 63.2, while the future prices received index rose 7 points to 67.2. The index for future capital expenditures rose 10 points to 41.2, its highest reading since June 2021.
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).
