October 2018 Philly Fed Manufacturing Survey Insignificantly Declined
The Philly Fed Business Outlook Survey insignificantly declined but remains in expansion. Key elements declined.
Analyst Opinion of the Philly Fed Business Outlook Survey
Consider this a weaker report than last month as key elements declined - and backlog now is in contraction.
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 than the others recently.
The index moved from +22.9 to +22.2. Positive numbers indicate market expansion, negative numbers indicate contraction. The market expected (from Econoday) 16.2 to 22.9 (consensus +20.3).
Regional manufacturing activity continued to grow in October, according to results from this month's Manufacturing Business Outlook Survey. The survey's broad indicators for general activity, new orders, shipments, and employment remained positive and near their readings in September. The firms reported continued growth in employment and an increase in the average workweek this month. Expectations for the next six months remained optimistic.
Survey Indexes Suggest Steady Growth
The diffusion index for current general activity edged down slightly, from 22.9 in September to 22.2 this month (see Chart 1). Nearly 36 percent of the manufacturers reported increases in overall activity this month, while 14 percent reported decreases. The new orders index decreased 2 points to 19.3, while the current shipments index increased 5 points to 24.5. The firms reported nearly no change in levels of inventories during October, as well as unfilled orders and delivery times (all of the indexes were near zero).
Econintersect believes the important elements of this survey are new orders and unfilled orders . New orders modestly declined but remains in expansion whilst unfilled orders significantly declined and now is in contraction.
This index has many false recession warnings.
Summary of all Federal Reserve Districts Manufacturing:
Richmond Fed (hyperlink to reports):
Kansas Fed (hyperlink to reports):
Dallas Fed (hyperlink to reports):
Philly Fed (hyperlink to reports):
New York Fed (hyperlink to reports):
Federal Reserve Industrial Production - Actual Data (hyperlink to report):
Holding this and other survey's Econintersect follows accountable for their predictions, the following graph compares the hard data from Industrial Products manufacturing subindex (dark blue bar) and US Census manufacturing shipments (lighter blue bar) to the Philly Fed survey (yellow bar).
In the above graphic, hard data is the long bars, and surveys are the short bars. The arrows on the left side are the key to growth or contraction.
Caveats on the use of Philly Fed Business Outlook Survey:
This is a survey, a quantification of opinion - not facts and data. Surveys lead hard data by weeks to months, and can provide early insight into changing conditions. Econintersect finds they do not necessarily end up being consistent compared to hard economic data that comes later, and can miss economic turning points.
This survey is very noisy - and recently showed recessionary conditions. And it is understood from 3Q2011 GDP that the economy was expanding even though this index was in contraction territory. On the positive side, it hit the start and finish of the 2007 recession exactly.
No survey is accurate in projecting employment - and the Philly Fed Business Outlook Survey is no exception. Although there are some general correlation in trends, month-to-month movements have not correlated with the BLS Service Sector Employment data.
Over time, there is a general correlation with real business data - but month-to-month conflicts are frequent.
Disclaimer: No content is to be construed as investment advise and all content is provided for informational purposes only.The reader is solely responsible for determining whether any investment, ...
more