Historic Strength Out Of Philly

It’s hard to get a report much stronger than this morning’s release of the Philadelphia Fed’s Manufacturing Report. The report showed the region’s manufacturing economy expanded rapidly in March across categories with similarly strong optimism with regards to the future. The headline number was expected to see only a 0.9 point increase from last month’s reading of 23.1. Instead, it more than doubled, leaping 28.7 points versus February’s reading. That is the largest one-month gain since the record 57.6 point increase in June of last year. Other than that, only September and October of 1980 have seen larger monthly moves in the data going back to 1968. Not only was the size of the move large, but at 51.8, the index reached the third-highest level on record behind March (58.5) and April (53.6) of 1973. Similarly, while not at the same sort of historic high, the expectations component of this month’s report also experienced a massive uptick that ranks in the top 1% of all monthly moves.

Given that strength in general business activity, it should come as no surprise that every index for current conditions came in the top decile of all readings with the same applying to some of the month over month moves. As for the indices regarding future expectations, the current levels are more modest relative to their historic ranges with only those for Delivery Times, Inventories, Number of Employees, and Capital Expenditures notably elevated. Like the current conditions indices, though, many of these saw moves that stand around the top 5% of all periods or better.

Demand was certainly a bright spot in this month’s report. The New Orders Index rose 27.5 points to the second-highest level on record. As the index for General Business Activity, the only time that the New Orders Index was higher was back in March 1973. While the one-month gain still stands in the top 1% of all monthly moves, there was actually a larger increase just two months ago when the index rose 28.1 points. Given the rapid acceleration in New Orders, Unfilled Orders also has risen sharply and has only been higher four other times. The most recent of these was back in January, but once again, prior to that, you would need to go all the way back to 1973 or earlier for readings as high as now.

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