The October Index of General Business Conditions in the manufacturing sector from the Philadelphia Fed recovered just about all of the prior month's loss. A surge to 17.3 from 2.2 in September compared to Consensus expectations for a lesser gain to 10.0.

During the last ten years there has been a 68% correlation between the level of the Philadelphia Fed Business Conditions Index and three month growth in factory sector industrial production. There has been a 50% correlation with q/q growth in real GDP.

The sub index measuring new orders led the improvement and rose to 18.6 from -0.5 while the shipments index improved moderately to 19.5 from 13.2. The index covering the number of employees surged to 17.0 and landed at the highest level since January. During the last ten years there has been a 64% correlation between the employment index and the three month growth in factory payrolls.

The business conditions index reflects a separate survey question, not the sub indexes.

The separate index of expected business conditions in six months recovered more than half of the prior month's decline and rose to 22.0.

The prices paid index jumped to the highest level since January. During the last ten years there has been a 75% correlation between the prices paid index and the three month growth in the intermediate goods PPI. The correlation with the finished goods PPI has been 50% and with the CPI it's been 43%.

The Philadelphia Fed index is based on a survey of 250 regional manufacturing firms, but these firms sell nationally and internationally.

The latest Business Outlook survey from the Philadelphia Federal Reserve Bank can be found here.