The Philly Fed Business Outlook Survey growth declined but remains well into expansion territory for the tenth month in a row. Key elements remain 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 strongly positive this year.
The market was expecting the index value of +20.0 to +36.0 (consensus 25.0) versus the actual at 24.5. Positive numbers indicate market expansion, negative numbers indicate contraction.
Firms responding to the Manufacturing Business Outlook Survey indicated that the pace of regional manufacturing activity remained positive but decreased in December. The survey's current indicators for general activity, new orders, shipments, and employment suggest growth; however, their values for this month were significantly lower than last month's. The survey's indicators of future activity show optimism about continued growth over the next six months but declined slightly from last month's readings.
Indicators Suggest Reduced Activity
The survey's broadest measure of manufacturing conditions, the diffusion index of current activity, decreased 16 points, from a reading of 40.8 in November to 24.5 this month (see Chart 1). The new orders and current shipments indexes also weakened significantly. The demand for manufactured goods, as measured by the current new orders index, decreased 20 points, from a reading of 35.7 last month to 15.7 this month. Shipments also fell, with its index falling 16 points to 16.1. Despite these declines from November, all the broad current activity indexes show a positive trend over the course of the current year.
Firms' responses suggest deterioration in the labor market compared with November. The current growth index fell 15 points, as the percentage of firms reporting an increase in employees fell from 29 percent in November to 17 percent in December. The percentage of firms reporting a longer workweek was greater than the percentage reporting a shorter workweek (20 percent versus 14 percent). Nonetheless, the workweek index fell almost 2 points, to 6.2.
