Philly Fed Manufacturing Index: Continued Improvement in July

The Philly Fed's Manufacturing Business Outlook Survey is a monthly report for the Third Federal Reserve District, covers eastern Pennsylvania, southern New Jersey, and Delaware. While it focuses exclusively on business in this district, this regional survey gives a generally reliable clue as to the direction of the broader Chicago Fed's National Activity Index.

The latest Manufacturing Index came in at 24.1, down 3.4 from last month's 27.5. The 3-month moving average came in at 2.8, down from -12.0 last month. Since this is a diffusion index, negative readings indicate contraction, positive ones indicate expansion. The Six-Month Outlook came in at 36, down from the previous month's 66.3.

The 24.1 headline number came in above the 20 forecasted at

Here is the introduction from the survey:

Manufacturing activity in the region continued to expand this month, according to firms responding to the July Manufacturing Business Outlook Survey. The survey’s current indicators for general activity, new orders, and shipments showed positive readings for the second consecutive month, coinciding with the phased reopening of the economy in our region. The employment index reached positive territory for the first time since March. Although future indicators for general activity, new orders, and shipments declined from last month’s readings, the indexes remained elevated, suggesting that the firms expect overall growth over the next six months. (Full Report)

The first chart below gives us a look at this diffusion index since 2000, which shows us how it has behaved in proximity to the two 21st century recessions. The red dots show the indicator itself, which is quite noisy, and the 3-month moving average, which is more useful as an indicator of coincident economic activity. We can see periods of contraction in 2011, 2012 and 2015, and a shallower contraction in 2013.

In the next chart, we see the complete series, which dates from May 1960. For proof of the high volatility of the headline indicator, note that the average absolute monthly change across this data series is 7.9.

The next chart is an overlay of the General Activity Index and the Future General Activity Index — the outlook six months ahead.