October 2017 Philly Fed Manufacturing Survey Improved

The Philly Fed Business Outlook Survey improved and remains in expansion. Key elements are in expansion but declined.

Analyst Opinion of the Philly Fed Business Outllook Survey

Consider this a weaker report than last month because of the decline of the key internals.

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 +23.8 to 27.9. Positive numbers indicate market expansion, negative numbers indicate contraction. The market expected (from Bloomberg / Econoday) 15.0 to 25.8 (consensus +20.2).

Manufacturing firms reported continued growth in regional manufacturing in October. The survey’s current indicators for general activity, new orders, shipments, and employment all remained positive this month. Both of the survey’s current labor market indicators showed notable improvement. The indexes assessing the six-month outlook suggest that firms remained optimistic about future growth.

Current Indicators Suggest Continued Growth

The index for current manufacturing activity in the region increased 4 points to a reading of 27.9 and is now at its highest reading since May (see Chart 1). More than 39 percent of the firms indicated increases in activity this month, while 11 percent reported decreases. Both the new orders and shipments indexes remained positive but fell this month, decreasing 10 points and 13 points, respectively. Both the unfilled orders and delivery times indexes were positive for the 12th consecutive month, suggesting longer delivery times and an increase in unfilled orders.

Firms reported, on balance, an increase in manufacturing employment and longer workweeks this month. Nearly 31 percent of the firms reported higher employment this month compared with 18 percent last month. No firms reported decreases in employment this month. The current employment index increased 24 points to a record high reading of 30.6. The average workweek index also increased 8 points, its highest reading in four months.