US: Philadelphia Fed Business Outlook Survey


Thu Sep 17 09:00:00 CDT 2015

Consensus Consensus Range Actual Previous
General Business Conditions Index - Level 6.3 2.5 to 10.5 -6.0 8.3

Highlights
There may very well be something wrong with the manufacturing sector, at least in the Northeast where the Empire State index has been in deep negative ground for the last two months followed now by a minus 6.0 headline for the Philly Fed index. This is the first negative reading since February 2014.

But the headlines for both of these reports, which are not composite scores of separate components, are sentiment scores of sorts, rough month-to-month assessments of general conditions. A key positive in today's is continued strength in new orders which rose 3.6 points to 9.4. Unfilled orders, nevertheless, have been trending into contraction, at minus 6.6 for the third straight negative reading.

But some details are very strong with shipments at plus 14.8 and employment at plus 10.2 for a 5-month high. In a negative signal also seen in the Empire State report, prices received, that is prices for final goods, is in contraction at minus 5.0.

The Fed is wondering whether global volatility and stock market losses are affecting consumer confidence. Early data this month from regional Feds suggest the effects may also be extending to business sentiment.

Market Consensus Before Announcement
The Philly Fed index is expected to slip 2.0 points in September to a still respectable 6.3. New orders were only 5.8 in August and a rise in September would boost expectations for October strength.

Definition
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.



Description
Investors need to monitor the economy closely because it usually dictates how various types of investments will perform. By tracking economic data such as the Philly Fed survey, investors will know what the economic backdrop is for the various markets. The stock market likes to see healthy economic growth because that translates to higher corporate profits. The bond market prefers more moderate growth so that it won't lead to inflation. The Philly Fed survey gives a detailed look at the manufacturing sector, how busy it is and where things are headed. Since manufacturing is a major sector of the economy, this report has a big influence on market behavior. Some of the Philly Fed sub-indexes also provide insight on commodity prices and other clues on inflation. The bond market is highly sensitive to this report because it is released early in the month and is available before other important indicators.