US: Philadelphia Fed Business Outlook Survey

Thu Nov 16 07:30:00 CST 2017

Consensus Consensus Range Actual Previous
General Business Conditions Index - Level 25.0 23.0 to 26.5 22.7 27.9

A little less heat is a welcome thing when it comes to the Philly Fed manufacturing report. The general conditions index moderated about 5 points to what is still an enormously strong 22.7 in November. New orders and shipments are both just over 20 with unfilled orders building sharply, at 17.0 for a 6.1 point gain. Manufacturers in this sample are struggling to keep up with the work as employment is at 22.6, down 8 points from October's 48-year record yet very strong. The sample continues to report elevated input costs but only limited traction for selling prices. Delivery times continue to lengthen but to an easing degree which is good news while inventories fell in the month.

This report continues to show some of the most impressive strength on record though actual government data on the factory sector have shown much less momentum. Watch later this morning for the manufacturing component of the industrial production report, a key reading on the factory sector that has been struggling to stay positive.

Market Consensus Before Announcement
The Philly Fed manufacturing index has easily beaten Econoday's consensus the last three reports, at 27.9 in October with November's consensus at 25.0. The employment index, at 30.6, posted a record in October while delivery times and inventories were up on hurricane effects.

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.

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.