The general business conditions index in the Philadelphia Fed Manufacturing Business Outlook survey is virtually unchanged at minus 13.5 in July after minus 13.7 in June. The reading is below the consensus of minus 10.2 in the Econoday survey of forecasters. If perceptions of current business conditions remain consistent with moderate contraction, the index for future conditions is trending higher at 29.1 in July after 12.7 in June.

The general business conditions index is a diffusion index and not calculated from components. At times, the detail indexes do not line up with the headline. In July, the details suggest weaker conditions. However, the relatively stable current conditions index is likely the product of what the price indexes have to say. The index for prices dips a bit to 9.5 after 10.5 in June. For the past four months there has been a significant easing in price pressures for manufacturers' input costs. The index for prices received jumps to 23.0 in July after 0.1 in June. The region's manufacturers apparently have been able to pass through higher prices to customers which suggests improved profitability.

The index for new orders is down to minus 15.9 in July from minus 11.0 in June and a negative for the 14th straight month. The unfilled orders index is a little less slow at minus 15.1 in July after minus 18.5 in June. Manufacturers in the region have little in the pipeline to maintain production. The shipments index is at minus 12.5 in July after a brief speeding up to 9.9 in June after three months of contraction. The inventories index hovers just below neutral at minus 1.0 in July after minus 3.5 in July.

The employment index remains in contraction for a fifth straight month at minus 1.0 in July after minus 0.4 in June. The index for the average workweek remains in contraction for the sixth month in a row at minus 3.0 in July after minus 8.2 in June. The region's factory sector continues to scale back hiring and hours in the absence of orders to fill.

The Philadelphia Fed manufacturing index has been in contraction the last eleven reports, at minus 13.7 in June with July's consensus at minus 10.2.

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.