Global| Oct 15 2020Philadelphia Fed Manufacturing Index Rebounds in October
by:Tom Moeller
|in:Economy in Brief
Summary
• Headline index rose to highest level since February. • Component strength was broad-based. • Expectations continued to strengthen. The Federal Reserve Bank of Philadelphia reported that its General Factory Sector Business Conditions [...]
• Headline index rose to highest level since February.
• Component strength was broad-based.
• Expectations continued to strengthen.
The Federal Reserve Bank of Philadelphia reported that its General Factory Sector Business Conditions Index jumped in October to 32.3% after declining to 15.0% in September. This was the highest level since February and the fifth consecutive month that the index has been in positive territory, indicating business expansion. The Action Economics Forecast Survey expected m/m stability. The percentage of firms reporting an improvement in business activity rose to 47% from 33% in September while the percentage reporting weaker conditions eased to 15% from 18% in September.
Haver Analytics calculates an ISM-Adjusted General Business Conditions Index using the same underlying components that comprise the ISM index. This measure rose sharply to a near record 61.5 in October.
Strength was exhibited broadly amongst the underlying series. The new orders index jumped to 42.6% this month and nearly set a new record. The shipments index similarly surged. More than 57% of respondents reported an increase in shipments. Unfilled orders surged and delivery times lengthened.
On the labor front, the employment index eased to 12.7% in October from 15.7% in September but was the fourth consecutive month in positive territory. The workweek index surged to 25.3% from 7.8% in September. It was the highest reading in just over two years.
The index of prices paid rose to 28.5% in October from 25.1% in September. An increased twenty-nine percent of respondents paid higher prices while none paid less. The prices received index eased slightly.
The Philadelphia Fed also surveys expectations for business activity in six months. The Future Activity Index strengthened to 62.7 in October from 56.6 in September.
The survey panel consists of 150 manufacturing companies in the third Federal Reserve District (which consists of southeastern Pennsylvania, southern New Jersey and Delaware). The diffusion indexes represent the percentage of respondents indicating an increase minus the percentage indicating a decrease in activity. The ISM-adjusted figure, calculated by Haver Analytics, is the average of five diffusion indexes: new orders, shipments, employment, delivery times and inventories with equal weights (20% each). Each ISM-adjusted index is the sum of the percent responding "higher" and one-half of the percent responding "no change."
The figures from the Philadelphia Federal Reserve dating back to 1968 can be found in Haver's SURVEYS database. The expectation from the Action Economics Forecast Survey is available in AS1REPNA.
| Philadelphia Fed - Manufacturing Business Outlook Survey (%, SA) | Oct | Sep | Aug | Oct'19 | 2019 | 2018 | 2017 |
|---|---|---|---|---|---|---|---|
| ISM-Adjusted Business Conditions | 61.5 | 57.3 | 54.1 | 57.7 | 55.5 | 57.7 | 57.2 |
| General Factory Sector Business Conditions | 32.3 | 15.0 | 17.2 | 6.8 | 9.9 | 20.9 | 27.3 |
| New Orders | 42.6 | 25.5 | 19.0 | 22.5 | 14.1 | 21.0 | 25.3 |
| Shipments | 46.5 | 36.6 | 9.4 | 19.3 | 16.9 | 22.8 | 26.7 |
| Unfilled Orders | 8.3 | 0.4 | -0.6 | 14.5 | 7.7 | 7.0 | 11.8 |
| Delivery Time | 20.5 | 12.2 | 7.3 | 9.3 | 9.4 | 9.5 | 10.6 |
| Inventories | -2.5 | -10.8 | -1.9 | 5.4 | 5.1 | 7.2 | 2.8 |
| Number of Employees | 12.7 | 15.7 | 9.0 | 27.1 | 16.9 | 21.5 | 16.1 |
| Average Workweek | 25.3 | 7.8 | 11.3 | 10.6 | 9.8 | 15.9 | 14.9 |
| Prices Paid | 28.5 | 25.1 | 15.3 | 15.0 | 19.7 | 46.1 | 30.4 |
| Expectations - General Business Conditions; Six Months Ahead | 62.7 | 56.6 | 38.8 | 32.6 | 28.4 | 36.8 | 47.1 |
Tom Moeller
AuthorMore in Author Profile »Prior to joining Haver Analytics in 2000, Mr. Moeller worked as the Economist at Chancellor Capital Management from 1985 to 1999. There, he developed comprehensive economic forecasts and interpreted economic data for equity and fixed income portfolio managers. Also at Chancellor, Mr. Moeller worked as an equity analyst and was responsible for researching and rating companies in the economically sensitive automobile and housing industries for investment in Chancellor’s equity portfolio. Prior to joining Chancellor, Mr. Moeller was an Economist at Citibank from 1979 to 1984. He also analyzed pricing behavior in the metals industry for the Council on Wage and Price Stability in Washington, D.C. In 1999, Mr. Moeller received the award for most accurate forecast from the Forecasters' Club of New York. From 1990 to 1992 he was President of the New York Association for Business Economists. Mr. Moeller earned an M.B.A. in Finance from Fordham University, where he graduated in 1987. He holds a Bachelor of Arts in Economics from George Washington University.
More Economy in Brief
