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 11/20/08 For Nov 2008 | ||||||||||||
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Highlights
Sweeping declines across the Philadelphia Federal Reserve's monthly survey indicate that the region's manufacturing sector is in severe contraction. The general business index slipped nearly 2 points in November to -39.3.
The most striking elements in the report are price reversals: prices paid -30.7 November vs. 7.2 October, prices received -15.5 vs. 5.3. The sudden absence of pricing power reflects a sudden weakening in demand for goods. New orders slipped further to -31.4 with unfilled orders down another 2 points to -29.1. Shipments are unchanged at -18.8. The supply chain is very loose with delivery times continuing to quicken and inventories continuing to contract. Employment is also contracting, down more than 7 points to -25.2. The workweek slipped further to -19.7.
Negatives also sweep readings across the six-month outlook where labor readings, unfortunately, are among the weakest of all. The outlook for prices is also negative in what will feed disinflation/deflation talk. This report really couldn't be weaker. Sample size for the report is small compared to the national ISM report, about 100 vs. 250 in any one month. But small or not and regional or not, this report offers reliable evidence of severe contraction underway in the manufacturing sector. The next report on the manufacturing sector will be the biggest of all, durable goods data on Wednesday. Losses in the stock market deepened following today's report.
The general business conditions component of the Philadelphia Fed's business outlook survey index has shown some of the weakest conditions for manufacturing in the country. The report's headline business activity index plunged to minus 37.5 from plus 3.8 in September for the sharpest one-month drop ever in 40 years of data. Dramatic declines also were seen in new orders, unfilled orders, shipments, workweek, and employment. Not surprisingly, prices softened significantly. The prices paid index fell to 7.2 in October from 31.5 in September while the prices received index slipped to 5.3 from 15.5.
Philadelphia Fed survey Consensus Forecast for November 08: -35.0
Range: -45.0 to -24.8
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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. |
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