After swinging wildly into the plus column to 12 in August, the Philadelphia Fed manufacturing index has swung wildly back into the negative column in October to minus 13.5 for the 12th contraction over the past 13 months. September's details show a sweep of declines: new orders at minus 10.2, unfilled orders minus 13.6, employment minus 5.7, shipments minus 3.2. And the gains in the report are unwelcome: costs up nearly 5 points to 25.7 and pass through to customers up 7 tenths to 14.8.

Yet the Philadelphia Fed's sample is nevertheless upbeat with general business conditions, at 11.1 versus August's 3.9, expected to improve over the six months with new orders expected to expand, at 25.6 versus last month's 18.2.

Regional business surveys have long been depressed in some contrast to definitive data which have been no worse than flat. And flat is the indication from Econoday's Relative Performance Index which now stands at plus 1, scrapping the zero line to indicate that recent US data on net are coming in no better than expected.

Jumping more than 25 points to plus 12, the Philadelphia Fed manufacturing index ended a full year of contraction in August. Retracement to plus 0.5 is September's consensus.

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.