What Is the Philadelphia Fed Index? Definition and Importance

The Philadelphia Fed Index was first conducted in 1968, spawning other surveys on regional manufacturing activity across the country.


What Is the Philadelphia Fed Index?

The Philadelphia Fed Index refers to monthly results of a survey on the business outlook of manufacturing activity in several states in the Mid-Atlantic.

The survey is formally known as the Manufacturing Business Outlook Survey and is conducted by the Federal Reserve Bank of Philadelphia—one of 12 Reserve Banks under the Federal Reserve. The Philadelphia Fed oversees the Third Federal Reserve District, which covers Delaware, 9 counties in southern New Jersey, and 48 counties in the eastern two-thirds of Pennsylvania.

Why Is the Philadelphia Fed Index Important?

The survey, conducted each month since May 1968, is the oldest among the 12 Fed banks monitoring regional manufacturing activities and is often viewed as accurately reflecting the pace of growth in manufacturing nationally. The survey’s influence as a leading economic indicator has pushed other regional banks to publish their own polls for their districts. For example, the Federal Reserve Bank of Richmond’s manufacturing index is the second oldest among the Fed banks and covers a wide range of manufacturers.

The Philadelphia Fed Index uses diffusion indexes, just like the ones used by the Richmond Fed and the Federal Reserve Bank of Kansas City, with its Kansas City Fed Manufacturing Survey. A reading greater than zero suggests expansion in manufacturing, while a reading of less than zero indicates contraction. The Philadelphia Fed Index tracks new orders, working hours, employment, and prices paid and received.

Because the data span more than 50 years, the index reliably provides an early indication on whether the economy is slipping into recession. The Philadelphia Fed asserts that its survey leads other indicators by weeks and correlates strongly with lagging indicators such as employment and industrial production.

While the survey is released later in the month than the purchasing managers’ index, it remains closely watched because it relies on answers provided by executives about their outlook on business conditions. That compares to other leading economic indicators, such as retail sales and auto sales, which are based on data of prices and units produced and sold. The survey also offers clues on inflationary pressures and provides an early indication on employment in manufacturing.

When Is the Philadelphia Fed Index Released?

The survey is released the third Thursday of the month at 10 a.m. ET.

Upcoming Release Dates in 2022

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