Philly Fed Manufacturing Index Beats Forecasts

Manufacturing conditions in the Philadelphia area beat forecasts in September, as a survey of executives reported the highest levels of current activity since June 2007.

The Philadelphia Fed’s Business Outlook survey advanced 10 points to +14.1, marking the second straight month of growth in the region covering eastern Pennsylvania, southern New Jersey, and Delaware. Forecasts were for +8.0

A third of the firms surveyed reported more activity in September, compared to 19% that said conditions deteriorated since August. This is broadly in line with the Tuesday’s Empire State survey from the New York Fed, which bounced up 7 points to 18.9. In both surveys, any reading above zero suggests growth.

New orders in the Philly Fed index edged one point lower but remained in growth mode at +3.3. Shipments jumped 8 points, adding to the 10-point gain in August to hit +8.2 this month. 

Indexes for employment, work hours, and prices received remained negative, however, “suggesting continued weakness,” the report said.

Employment conditions deteriorated slightly to a -12.9 reading, while work hours moderated slightly to -3.9. Prices received fell nearly 10 points to -10.6.

“This is a decent report, but there are some concerns,” said Charmaine Buskas, senior analyst at TD Securities. “The slippage in the new orders index is disappointing, especially considering the softness in the U.S. dollar in September which would suggest improvement in appetite for exports.”

Still, the headline index is the mostly closely watched part of the report, and its substantial gain over two months points to further gains in the nationwide ISM survey, to be released the first week of October.

Looking ahead, executive were optimistic about heading into 2010.

“The survey's broad indicators of future activity continued to suggest that the region's manufacturing executives expect business activity to increase over the next six months,” the Fed report said.

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