Philly Fed Business Survey Slightly Less Good in April 2011

The Philly Fed Business Outlook Survey quantitatively was less good in April 2011.   The problem with surveys is that they are a quantification of opinion, and changes month-to-month may be real, or not.

The reason surveys are used at all is that they are a month ahead of hard data – and for a variety of reasons analysts are looking to indications of change.  In this report, I would argue there is little information which changes Econintersect’s view of  moderately growing business conditions.

Results from the Business Outlook Survey suggest that regional manufacturing activity continued to grow in April but at a slower pace than in March. Nearly all of the survey’s broadest indicators remained positive but fell from their readings in the previous month. Increases in input prices continue to be widespread, and a significant percentage of firms reported increases in prices for their own manufactured goods. The survey’s indicators of future activity fell notably this month; however, most firms expect continued growth over the next six months.

The survey’s broadest measure of manufacturing conditions, the diffusion index of current activity, decreased from 43.4 in March to 18.5 this month.

The demand for manufactured goods, as measured by the current new orders index, showed a similar slowing: The index fell 22 points, following seven consecutive months of increase. The shipments index declined 6 points and remained at a relatively high level. Firms continued to report that unfilled orders and delivery times were still rising.

Econintersect believes the important elements of this survey are new orders and unfilled orders.  The number of respondents who thought new orders were improving fell this month.  It is likely last month’s survey was overly optimistic as it set a historical record for the number of respondents who thought new orders were improving.

The gentle rise in unfilled orders (backlog) continues – and has been confirmed to date by hard data.

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