The general conditions index from this business outlook survey is a diffusion index of manufacturing conditions within the Philadelphia Federal Reserve district. This survey, widely followed as an indicator of manufacturing sector trends, is correlated with the ISM manufacturing index and the index of industrial production. Why Investors Care
| Released on 10/18/07 For Oct 2007 | ||||||||||||
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Highlights
Growth appears to be no more than modest for the manufacturing sector, at least according to the Philadelphia Fed's regional survey that posted an October business activity index of 6.8 vs. 10.9 in September. Any reading above zero indicates that the number of respondents reporting month-to-month growth is greater than those reporting a decline.
New orders barely showed any growth, at 2.7 vs. September's 15.1. Unfilled orders contracted for a second month, -8.2 vs. -1.0. Shipments also contracted, -4.1 vs. 16.9. But there were positives in the report including a rise in employment, 12.6 vs. 7.5, and a rise in the six-month overall outlook to 41.5 vs. 35.7.
But inflation readings were not a positive with prices paid way up to 40.3 vs. 23.1. More of these increases at the input level are showing up on the output side as prices received climbed to 12.4 from 3.3.
Supply chain readings were positive with inventories at -15.0 vs. 4.0 indicating that firms in the region, facing slowing growth ahead, are cutting back on inventories -- a plus that will help limit the impact of a slowdown on future business conditions. Deliveries slowed but only slightly, to 0.9 vs. -6.1 in September. October's delay in deliveries was likely not related to shortages. It would take shortages and a more dramatic delay in deliveries to really heat up price pressures.
This is a more substantial and less volatile report than the Empire State index released earlier this week that showed strength. The Philadelphia report will likely set up expectations for flat results in the ISM manufacturing report at the beginning of November. Financial markets showed no significant reaction to the results.
The general business conditions component of the Philadelphia Fed's business outlook survey index rebounded to 10.9 in September from a dead flat 0.0 reading in August. While not yet in the robust range, the Philly Fed index currently is alone among major manufacturing surveys with the notable improvement for the latest month. The ISM, Chicago-NAPM, and Empire State surveys either weakened in their latest reading or were only modestly positive. For the Philly Fed index, the latest report pointed toward continuing better health as both the new orders and shipments indexes showed moderate improvement. Price readings were mixed with prices paid up sharply but prices received down slightly.
Philadelphia Fed survey Consensus Forecast for October 07: 7.0
Range: 4.6 to 15.0
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The Philadelphia Fed's business outlook survey is a good leading indicator for the index of industrial production. It is reported in the third week of the month and thus has a lead time of nearly three weeks. |
| 2007 Release Schedule | ||||||||||||||||||||||||||
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