Business conditions continue to be better then any period since 2005 according the Philly Fed’s January 2011 Business Outlook Survey. It is hard to do an analysis without breaking into laughter when the business respondents in the Philadelphia think conditions six months from today will be better than any time since 2003.
Yet, if I step away from the data far enough – and using other anecdotal data I am seeing, a case can be made that the economy is rediscovering the growth pulse of the first quarter of 2011.
The unadjusted data in January 2011 for new orders and unfilled orders are starting to resemble from the 1Q2010 which preceeded six months of growth in the first half of the year.
If unfilled orders are expanding, the health of a business is improving. Most business is cyclic, and unfilled orders allow and even production throughout the year. If backlogs continue to grow, eventually more workers and more plant operations are required. Note that unfilled orders hit a high. The last time this level of improving backlog was seen in this survey was in August 2006.
It is possible that we are seeing a positive pulse in backlog.
Business conditions definitely improved rapidly in 1Q2010, and the January 2011 survey there are signs of re-emerging growth showing up in new orders. Be careful with this though; this is a survey, and not hard data. Surveys lack the accuracy and quantification of hard data, and should not be taken as seriously.
The headlines from the survey using the Philly Fed’s seasonally adjusted data:
According to respondents to the January Business Outlook Survey, the region’s manufacturing sector continued to expand this month. All of the broad indicators remained positive, with more firms reporting increases in new orders. Firms also reported a pickup in hiring. Increases in input prices continue to be reported, and some price increases for manufactured goods are also in evidence. Firms remain quite confident that an expansion of manufacturing activity will continue through the first half of the year.
Empire State Manufacturing Survey Up and Noisy by Steven Hansen
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Manufacturing New Orders Remain Flat in November 2010 by Steven Hansen
China on Wheels by John Lounsbury