The Philly Fed Business Outlook Survey improved significantly and is now well into expansion territory after last month’s contraction. Key elements also returned to 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.
The market was expecting the index value of -0.2 to 9.0 (consensus 3.0) versus the actual at 9.0. Positive numbers indicate market expansion, negative numbers indicate contraction.
Manufacturing activity rebounded in March, according to firms responding to this month’s Business Outlook Survey. The survey’s broadest indicators for general activity, new orders, and shipments increased and recorded positive readings this month, suggesting a return to growth following weather-related weakness in February. Firms’ employment levels were reported near steady, but responses reflected optimism about adding to payrolls over the next six months. The survey’s indicators of future activity reflected optimism about continued growth over the next six months.
Indicators Suggest Activity Rebounded This Month
The survey’s broadest measure of manufacturing conditions, the diffusion index of current activity, increased from a reading of -6.3 in February to 9.0 this month, nearing its reading in January (see Chart). The current shipments and new orders indexes also returned to positive readings this month. The demand for manufactured goods, as measured by the current new orders index, increased from -5.2 to 5.7 this month. Shipments also increased, with its index rising 16 points to a reading of 5.7. Firms reported, on balance, shorter delivery times and an increase in unfilled orders this month. Lower inventories were also reported in March.
Indicators suggest stable labor market conditions this month. The employment index remained positive for the ninth consecutive month but edged 3 points lower, suggesting near-steady employment: The percentage of firms reporting increases in employment (17 percent) edged out the percentage reporting decreases (15 percent). The workweek index was slightly positive this month, following negative readings over the previous two months.
The survey’s price diffusion indexes fell slightly this month, suggesting moderate price pressures. The prices received index decreased 3 points, to 4.3. Thirteen percent of the firms reported increases for their own products, while 9 percent reported price reductions. The largest percentage (77 percent) indicated that their firms’ prices were steady this month. The prices paid index edged slightly lower, to 13.9. Nineteen percent of the firms reported higher input prices, down from 24 percent in February.
