July 2017 Philly Fed Manufacturing Survey Declined But Remains In Expansion

The Philly Fed Business Outlook Survey declined but remains in expansion. Key elements are in expansion but significantly weaker.

Analyst Opinion of the Philly Fed Business Outllook Survey

This month new orders significantly declined and is barely in expansion. Consider this a weak report. The New York Fed’s manufacturing survey (released earlier this week) also significantly declined but remained in expansion.

This is a very noisy index which readers should be reminded is sentiment based. The Philly Fed historically is one of the more negative of all the Fed manufacturing surveys but has been more positive then the others recently.

The index moved from +27.6 to +19.5. Positive numbers indicate market expansion, negative numbers indicate contraction. The market expected (from Bloomberg / Econoday) 15.0 to 34.2 (consensus +23.5).

Manufacturing activity in the region continues to grow but at a slower pace, according to results from the July Manufacturing Business Outlook Survey. The diffusion indexes for general activity, new orders, shipments, employment, and work hours remained positive but fell from their readings in June. Respondents also reported a moderation of price pressures this month. Firms remained generally optimistic about future growth. More than one-third of the manufacturers expect to add to their payrolls over the next six months.

Current Indicators Suggest Positive but Weaker Growth

The index for current manufacturing activity in the region decreased from a reading of 27.6 in June to 19.5 this month (see Chart 1). The index has been positive for 12 consecutive months, but July’s reading is the lowest since November. Thirty-seven percent of the firms indicated increases in activity in July, down from 42 percent last month. The shipments index decreased 16 points, while the new orders index fell 24 points. Nearly 31 percent of the respondents reported a rise in new orders this month, down from 45 percent in June. Both the delivery times and unfilled orders indexes were positive for the ninth consecutive month, suggesting longer delivery times and increases in unfilled orders.