It is hard to imagine a summary of a survey of business which would sound more positive than the headlines for the February 2011 Philadelphia Fed’s Business Outlook Survey. However, although the survey is positive, it is not a blowout explosion of optimism as some may think.
Here are the headlines:
According to respondents to the February Business Outlook Survey, growth in the region’s manufacturing sector picked up this month. Most of the broad indicators showed an improvement over their readings in January, and employment among reporting firms increased. Increases in input prices continued to be widespread this month, and slightly more firms reported increases in prices for their own manufactured goods. The survey’s broad indicators of future activity suggest that firms expect a continued expansion in activity over the next six months.
Indicators All Point to Growth
The survey’s broadest measure of manufacturing conditions, the diffusion index of current activity, increased from 19.3 in January to 35.9 this month. This is the highest reading since January 2004.
The demand for manufactured goods is showing continued strength: Although the new orders index was virtually unchanged in February, it has increased over the past six months. The shipments index also improved markedly, increasing 22 points. Firms also reported a rise in unfilled orders and longer delivery times this month.
Firms’ responses continue to indicate improving labor market conditions. The current employment index increased 6 points, and for the sixth consecutive month, the percentage of firms reporting an increase in employment (29 percent) is higher than the percentage reporting a decline (5 percent). More than twice as many firms reported a longer workweek (23 percent) than reported a shorter one (10 percent).
Remember this is a survey, and it should hold the same weight as anecdotal data. However the data is correlating with the economic pulse we are seeing in early hard data.
You will note in the chart above that the “improving” conditions are higher than (or equal to the high of) any point since the January 2010. Econintersect believes there is an expansion pulse currently underway in the economy – although our data is showing it to be very weak on a historical basis.