The general business conditions index in the Philadelphia Fed survey of manufacturing is minus 12.8 in October after rising sharply to 23.2 in September. The October reading is well below the consensus of 7.5 in the Econoday survey of forecasters. It is the lowest since minus 26.4 in April when the Trump administration announced widespread hikes in tariffs that were more severe than expected. The decline in the index points to weak confidence in current conditions among survey respondents. However, the index for future conditions about six months from now is up to 36.2 in October from 31.5 in September and is the highest since 47.2 in May when some rollbacks in tariffs were announced.

The October decrease for current conditions is likely associated with greater uncertainty about the economy during the shutdown of the federal government on top of signs of slower growth.

The conditions index is a diffusion index, not calculated from components. As a result, the detail indexes may tell a somewhat different story.

In October, the index for new orders is up to 18.2 from 12.4 in September and the order backlogs index is up to minus 2.2 after minus 6.6. The shipments index moderates to 6.0 in October after 26.1 in September. The delivery times index is up to 6.6 in October from minus 3.4 in September. The inventory index is down to 5.4 in October after 15.0 in the prior month. Although new orders are coming in solidly for a second month in a row, there may be little momentum going into coming months. Orders are shipping out steadily. The pace of goods moving along the supply chain is running unevenly, in part due to changes in trade and tariff policy that are delaying some imports, especially while businesses are working out where the costs of tariffs are getting paid.

The employment index slows slightly to 4.6 in October from 5.6 in September. Businesses are hiring where they can find workers with the right skills and experience. The average workweek index continues to show longer hours at 12.8 in October after 14.9 in September as businesses work through current orders.

The index for prices paid rose to 49.2 in October from 46.8 in September. The index for prices received is up to 26.8 after 18.8 in the prior month. Manufacturers are facing higher costs and passing them through to customers wherever possible.

Growth seen slowing but still positive at 7.5 in October from 23.2 in September.

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.