The general business conditions index in the Philadelphia Fed manufacturing business outlook survey swings to a positive 12.0 in August after minus 13.5 in July. It is the first positive reading since 6.3 in August 2022 and the highest since 13.1 in April 2022. The August reading is well above the consensus of minus 10.0 in the Econoday survey of forecasters. Respondents to the Philadelphia survey appear to have reacted to an inrush of new orders which makes the near-term outlook more optimistic. However, the index for future business conditions moderates to 3.9 in August after a jump higher to 29.1 in July from 12.7 in June. Overall, while the factory sector in the Philadelphia Fed district registers an upnote for August, it comes after 11 months of contraction in the diffusion index. A single solid report is not a trend.

The index for new orders is at 16.0 in August after minus 15.9 in July. The index has been in contraction for 14 months in a row. Manufacturers in the district will find some relief in getting orders on the books, but it will take more than one month's orders to firm conditions sustainably. Some orders are getting a quick turnaround. The index for shipments is up to 5.7 in August after minus 12.5 in July. Supply chains are moving quickly, although less so. The index for delivery times is up to minus 4.8 in August after minus 15.1 in July.

The index for prices paid bumps up to 20.8 in August from 9.5 in July and probably is mostly due to energy costs. The reading is the highest since 23.5 in March and points to some escalation in input costs. However, it remains far less than the near-term peak of 75.7 in April 2022. The index for prices received is down to 14.1 in August after 23.0 in July. Manufacturers are likely going to have difficulty in passing on higher costs if the pace of prices paid remains more elevated.

The Philadelphia Fed manufacturing index has been in long uninterupted contraction, at minus 13.5 in July with August's consensus at minus 10.0.

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.