The general business conditions index in the Philadelphia Fed manufacturing business outlook survey swings higher to 23.2 in September from minus 0.3 in August. This is substantially above the consensus of 3.0 in the Econoday survey of forecasters. The large change suggests that survey respondents are once again reacting to news regarding trade and tariffs which has brought a lot of volatility to the survey data. The future conditions index is trending higher at 31.5 in September from 25.0 in August, up for third straight month and the highest since 47.2 in May. Current conditions remain uncertain and the near-term outlook only modestly optimistic.

The conditions indexes are diffusion indexes and as such are not calculated from components. The detail indexes may not align with the headline.

In September, much of the improvement in current conditions can be attributed to a rise in the new orders index to 12.4 after minus 1.9 in August. The order backlog index is slightly less negative at minus 6.6 in September after minus 16.8 in August. There remains little work in the pipeline to support activity going forward. The shipments index jumps to 26.1 in September from 4.5 in August as new orders are filled and shipped quickly.

The index for delivery times continues to hover a little below neutral at minus 3.4 in September after minus 5.4 in August. There are few delays along the supply chain. The inventories index is 15.0 in September after minus 6.2 in August as businesses took another opportunity to stock up at an opportunity amid evolving tariff policy.

The employment index is little changed at 5.6 in September after 5.9 in August. Some manufacturing businesses may be adding skilled workers where shortages of available expertise is easing. The average workweek index is up to 14.9 from 4.7 in the prior month, suggesting that some factories have increased hours in addition to bringing on new employees.

The index for prices paid is significantly softer at 46.8 in September from 66.8 in August and 58.8 in July, pointing to less upward price pressure after the immediate impact of higher tariffs. The need to pass through higher costs has lessened and/or is seen as possible due to customer resistance. The prices received index is down to 18.8 in September from 36.1 in August and 34.8 in July.

The consensus sees the manufacturing index back to marginal expansion at 3.0 in September from minus 0.3 in August.

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.