The Philly Fed's Manufacturing Business Outlook Survey is a monthly survey of about 250 manufacturers in the Third Federal Reserve District, which covers eastern Pennsylvania, southern New Jersey, and Delaware. Participants of the survey indicate the relative level of general business conditions in the region. Since this is a diffusion index, negative readings indicate contraction, positive ones indicate expansion. While it focuses exclusively on business in this district, this regional survey gives a reliable direction of the broader Chicago Fed's National Activity Index.
The latest Philadelphia Fed manufacturing index showed a decline in activity this month. The index sank nearly 39 points to -26.4, its lowest reading in two years. This was the third consecutive monthly decline for the index and the largest one-month drop since April 2020. The latest reading was much lower than the forecast of 2.2.
Here is the summary from the survey:
Manufacturing activity in the region declined this month, according to the firms responding to the April Manufacturing Business Outlook Survey. The survey’s indicators for general activity, new orders, and shipments all fell and turned negative. The employment index registered a near-zero reading, suggesting steady employment conditions. Both price indexes continue to suggest overall price increases. The future activity indicators continue to suggest subdued expectations for growth over the next six months.
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 three 21st century recessions. The green dots show the indicator itself, which is quite noisy. Therefore, we've included the three-month moving average (purple line), which is more useful as an indicator of coincident economic activity. We can see longer and deeper periods of contraction during each of the recessions with shallower contractions in '02, '03, '11, '12, '13, and '15. Most recently, the index's 3-month moving average contracted from July 2022 to December 2023 however no recession was called during that time.
In the latest report the 3-month moving average remained in positive territory for a 16th straight month but sits at its lowest level over that same time frame.
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 8.3.
The next chart is an overlay of the General Activity Index and the Future General Activity Index — the outlook six months ahead. In April, the six-month outlook increased to 6.9 from 5.6 in March.
Future Indicators Remain Positive but Low
The diffusion index for future general activity ticked up 1 point to 6.9 in April, after declining 22 points in March. Nearly 36 percent of the firms expect an increase in activity over the next six months, exceeding the 29 percent that expect a decrease; 25 percent expect no change. The future new orders index increased 4 points to 6.6, and the future shipments index decreased 6 points to 5.0, its lowest reading since June 2024. The firms expect mostly steady employment over the next six months: The future employment index fell 18 points to -0.6, its lowest reading since February 2016. The firms were roughly evenly split between expecting increases and decreases in future employment (22 percent), and roughly half expect no change. The future prices paid index climbed to 63.1, and the future prices received index jumped 28 points to 67.7, its highest reading since June 2021. The index for future capital expenditures fell 11 points to 2.0. Nearly three-quarters of the firms expect no change in capital spending.
For comparison, here is the latest ISM Manufacturing survey.
Let's compare all five Regional Manufacturing indicators. Here is a three-month moving average overlay of each since 2004 (for those with data).
