The general business conditions index in the Philadelphia Fed manufacturing business outlook survey is up to 15.5 in April after 3.2 in the prior month. The April readings is well above the consensus of 0.0 (zero) in the Econoday survey of forecasters. The index has now been positive for three months in a row and is the highest since 16.9 in April 2022. The index rarely had a positive reading from June 2022 through January 2024, but seems to have exited the long period of nearly universal contraction in the region's factory sector. The future business conditions index is slightly lower at 34.3 in April after 38.6 in March. However, these are two consecutive strong numbers at levels not seen since mid-2021. The region appears to be experiencing an uptick in current activity and anticipating solid growth in the near future.

The detail indexes point to a surge in new orders as the main factor in lifting sentiment for current conditions among the Philadelphia survey respondents. The index for new orders is up to 12.2 in April after 5.4 in March, and is the highest since 13.5 in May 2022. The index for order backlogs is little changed at 0.8 in April after 1.0 in March. Both the indexes for orders and order backlogs are up for a second month in a row. This is the first time either index has seen back-to-back expansion since April-May 2022.

The shipments index is up to 19.1 in April after 11.4 in March as new orders are processed. The delivery times index is up to minus 9.4 in April after minus 16.7 in March. While delivery times remain consistent with no delays along the supply chain, the pickup suggests there is less slack. The inventories index is down to minus 8.9 in April after 4.4 in March. The region's manufacturers are managing to avoid any pile up in stock while adjusting to an uncertain outlook.

The employment index is at minus 10.7 in April after minus 9.6 in March and minus 10.3 in February. Hiring in the manufacturing sector remains slow and probably will continue to do so until there is convincing evidence of a need and/or that workers with the right skills are available. In the meantime, businesses will try to retain those already on payrolls in anticipation of rising activity. However, the average workweek contracted more to minus 18.7 in April after minus 0.2 in March.

The index for prices paid jumps to 23.0 in April from 3.7 in March, in part on rising energy costs. A one-month jump should not be overthought and does not necessarily mean a resumption of upward price pressures. The index for prices paid is up a bit to 5.5 in April after 4.6 in March. Manufacturers can still pass through some price increases, but are less able to do so than in the second half of 2023.

No change at zero is expected for the Philadelphia Fed manufacturing index in April. March's 3.2 did show some growth and, for a second report in a row, was better than expected.

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.