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Note from Doug: Having lived for two wonderful years in Paoli, PA, a suburb west of Philadelphia just south of Valley Forge, I have a special interest in this regional indicator. But, more importantly, it gives a generally reliable clue as to direction of the broader Chicago Fed's National Activity Index.

The Philly Fed's Business Outlook Survey is a monthly report for the Third Federal Reserve District, covers eastern Pennsylvania, southern New Jersey, and Delaware. The latest gauge of General Activity came in at 9.4, a rise from the previous month's 6.4 (revised from 6.5). The 3-month moving average came in at 8.3, down from 10.4 last month. Since this is a diffusion index, negative readings indicate contraction, positive ones indicate expansion. Today's six-month outlook at 34.4 is a decline from last month's 44.0 (revised from 45.8).

Here are the introduction and summary sections from the Business Outlook Survey released today:

Manufacturing growth in the region continued in January, according to firms responding to this month's Business Outlook Survey. The survey's broadest indicators for general activity, new orders, shipments, and employment were positive, signifying continued moderate growth. The survey's indicators of future activity moderated but continue to suggest general optimism about growth over the next six months.


The January Business Outlook Survey suggests that activity in the region's manufacturing sector increased moderately this month. Firms reported increases in overall activity, new orders, and employment in January. Price increases for firms' own manufactured goods were less widespread this month. The survey's future activity indexes suggest that firms expect growth over the first half of 2014. (Full PDF Report)

Today's 8.3 came in slightly below the 8.6 forecast at

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 two 21st century recessions. The red dots show the indicator itself, which is quite noisy, and the 3-month moving average, which is more useful as an indicator of coincident economic activity. We can see periods of contraction in 2011 and 2012 and a shallower contraction in 2013. The indicator is now off its post-contraction peak in September of last year.

(click to enlarge)

In the next chart we see the complete series, which dates from May 1960. The average absolute monthly change across this data series is 7.4, which shows that the 3.0 point change from last month is relatively minor.

(click to enlarge)

The next chart is an overlay starting in 2000 of the General Activity Index and the Future General Activity Index — the outlook six months ahead. The declines for the latest month are comparable in magnitude.

(click to enlarge)

The Philly Fed General Activity Index continues to be a key indicator to watch closely.

Source: Philly Fed Business Outlook: Continued Growth In January, Future Outlook Moderates