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Philly Fed Business Outlook: Continued Growth in January, Future Outlook Moderates

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    January 17, 2014

    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.Summary
    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 Investing.com.

    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.

    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.

    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.

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

    Images: Flickr (licence attribution)

    About The Author

    My original dshort.com website was launched in February 2005 using a domain name based on my real name, Doug Short. I’m a formerly retired first wave boomer with a Ph.D. in English from Duke. Now my website has been acquired byAdvisor Perspectives, where I have been appointed the Vice President of Research.

    My first career was a faculty position at North Carolina State University, where I achieved the rank of Full Professor in 1983. During the early ’80s I got hooked on academic uses of microcomputers for research and instruction. In 1983, I co-directed the Sixth International Conference on Computers and the Humanities. An IBM executive who attended the conference made me a job offer I couldn’t refuse.

    Thus began my new career as a Higher Education Consultant for IBM — an ambassador for Information Technology to major universities around the country. After 12 years with Big Blue, I grew tired of the constant travel and left for a series of IT management positions in the Research Triangle area of North Carolina. I concluded my IT career managing the group responsible for email and research databases at GlaxoSmithKline until my retirement in 2006.

    Contrary to what many visitors assume based on my last name, I’m not a bearish short seller. It’s true that some of my content has been a bit pessimistic in recent years. But I believe this is a result of economic realities and not a personal bias. For the record, my efforts to educate others about bear markets date from November 2007, as this Motley Fool article attests.
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