US: Philadelphia Fed Business Outlook Survey

Thu Dec 21 07:30:00 CST 2017

Consensus Consensus Range Actual Previous
General Business Conditions Index - Level 21.8 17.5 to 25.0 26.2 22.7

Respondents to the Philly Fed's manufacturing sample are reporting new acceleration from an already enormously strong rate of growth. At 26.2 in December, the general business expectations easily beat Econoday's high estimate for the best reading since October and among the best of the ongoing expansion.

New orders are pouring in this month, up more than 8 points to an unusually strong 29.8. The build in unfilled orders slowed slightly but also remains unusually strong at 10.8. Shipments are moving quickly at 23.4 despite congestion in the supply chain as deliveries slowed once again. Input costs remain elevated and selling prices are showing traction.

Employment is also strong yet, at 18.1, is still down from the two prior months which may hint at lack of available labor. Optimism on the general outlook rose more than 3 points to 53.5, again one of the best readings of the expansion.

Most indications are pointing to a strong factory contribution to the fourth-quarter economy with this report once again the strongest of any.

Market Consensus Before Announcement
A little cooling is welcome when it comes to the Philly Fed manufacturing index as it was in November when the headline index slowed slightly to what is still a very strong 22.7. New orders and shipments were both just over 20 in November with unfilled orders building sharply, at 17.0 for a 6.1 point gain. Respondents in this sample have been struggling to keep up with the work as employment, at 22.6 in November, fell 8 points from October's 48-year record. Econoday's consensus for December's headline is 21.8.

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.