Philly Fed Manufacturing Index: Expansion In September

The Philly Fed's Manufacturing Business Outlook Survey is a monthly report for the Third Federal Reserve District, covers eastern Pennsylvania, southern New Jersey, and Delaware. While it focuses exclusively on business in this district, this regional survey gives a generally reliable clue as to the direction of the broader Chicago Fed's National Activity Index.

The latest Manufacturing Index came in at 12.0, down 4.8 from last month's 16.8. The 3-month moving average came in at 16.9, up from 13.0 last month. Since this is a diffusion index, negative readings indicate contraction, positive ones indicate expansion. The Six-Month Outlook came in at 20.8, down 3.9 from the previous month's 32.6.

Today's 16.8 headline number came in above the 10.0 forecast at Investing.com.

Here is the introduction from the survey released today:

Manufacturing activity in the region continued to expand this month, according to results from the September Manufacturing Business Outlook Survey. The survey's broad indicators remained positive, although their movements were mixed: The indexes for general activity and new orders fell, while the indexes for shipments and employment increased. The survey’s price indexes increased notably this month. The survey’s future general activity index moderated but continues to suggest growth over the next six months. (Full Report)

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 two 21st century recessions. The red dots show the indicator itself, which is quite noisy, and the 3-month moving average, which is more useful as an indicator of coincident economic activity. We can see periods of contraction in 2011, 2012 and 2015, and a shallower contraction in 2013. 2016 saw an improvement but has since lost its gains and has been detracting.

(Click on image to enlarge)

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 7.7.

(Click on image to enlarge)