ECON: Philly Fed Index Much Stronger Than Expected
- Headline index 22.3 vs 10.0 forecast
- Conditions 58.2 vs 38.9 previously
- New Orders 21.2 vs 5.3 previously
- Employment Index 10.3 vs 3.5
- Market Reaction: Bond markets weaker at first, but holding in a relatively supportive fashion so far.
Manufacturing activity picked up in September, according to firms responding to this month’s Business Outlook Survey. The survey’s broadest indicators for general activity, new orders, shipments, and employment were all positive and higher than in August. The survey's indicators of future activity were significantly higher, suggesting improved optimism about growth over the next six months.
Indicators Suggest Expansion
The survey’s broadest measure of manufacturing conditions, the diffusion index of current activity, increased from 9.3 in August to 22.3 this month (see Chart). The index has now been positive for four consecutive months and is at its highest reading since March 2011. The percentage of firms reporting increased activity this month (36 percent) was greater than the percentage reporting decreased activity (14 percent).
The demand for manufactured goods, as measured by the current new orders index, increased 16 points, to 21.2. Shipments rebounded from last month: The current shipments index increased 22 points. The diffusion indexes also suggest that, on balance, inventories and deliveries were near steady this month, while unfilled orders increased slightly.
Labor market indicators showed improvement this month. The current employment index increased 7 points, to 10.3, its highest reading since April of last year. The percentage of firms reporting increases in employment (21 percent) exceeded the percentage reporting decreases (10 percent). Firms also reported a longer average workweek compared with last month, and the index increased 15 points, to 12.2.