The general business conditions index in the Philadelphia Fed manufacturing business outlook survey is down to minus 31.3 in April after minus 23.2 in March. The April reading is well below the consensus of minus 19.4 in an Econoday survey. The reading is the lowest since minus 43.2 in May 2020 during the pandemic and minus 34.7 in March 2009 when the Great Recession was beginning to let up. The Philadelphia Fed noted this is the eighth contractionary index in a row. The index for future business conditions remains in contraction at minus 1.5 in April but is improved from the minus 8.0 in March.

The general business conditions index is a diffusion index and therefore not calculated from components. However, the details of the report show that activity is weak. The index for new orders continues to show contraction at minus 22.7 in April after minus 28.2 in March. Order backlogs are being reduced on an ongoing basis with the index at minus 11.1 after minus 21.3 in the prior month. The shipments index shows less slowing at minus 7.3 in April after minus 25.4 in March. The index for employment is improved to nearer neutral at minus 0.2 in April from minus 10.3 in the prior month while the average workweek contracts less at minus 8.4 from minus 22.0.

Delivery times are little changed at minus 25.0 in April from minus 24.3 in March. Inventories are down at minus 17.9 from minus 11.2 in March.

The bright spot in the report, if it can be called that, is the index for prices paid fell to 8.2 in April from 23.5 in March and is the lowest since 7.8 in June 2020 during the pandemic and since minus 2.2 in March 2016 when energy prices were on the decline. Inflationary pressures for the factory sector have declined sharply in recent months. The index for prices received is minus 3.3 in April after 7.9 in March. This is the first time that manufacturers haven't raised prices since minus 6.3 in May 2020.

The Philadelphia Fed manufacturing index has been in contraction the last seven reports and very deeply so in March at minus 23.2 and also February at minus 24.3. April's contraction is seen at 19.4.

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.