The Philly Fed Business Outlook Survey headlines for July 2011 show the index has entered recessionary territory. The survey’s broadest measure of manufacturing conditions, the diffusion index of current activity, decreased from a slightly positive reading of 3.2 in July to -30.7 in August. The index is now at its lowest level since March 2009 (see Chart below). The demand for manufactured goods, as measured by the current new orders index, paralleled the decline in the general activity index, falling 27 points. The current shipments index fell 18 points and recorded its first negative reading since September of last year. Suggesting weakening activity, indexes for inventories, unfilled orders, and delivery times were all in negative territory this month.
Surveys are NOT hard data. It is a quantification of opinion. Econintersect analysis indicates economic growth is slowing, based on key factors in the Philly Fed survey.
To be sure this is the lowest reading since the recession ended and mirrors the survey dip seen one year ago. But this index quantifies opinion of many factors which Econintersect believes are not significant forces at this point.
This month’s Philly Fed business outlook survey has reverted to almost exact values of one year ago using unadjusted data. Early evidence is accumulating that the current recovery sub-cycle may be peaking, a call made by Econintersect’s economic activity indicator in late March.
The Philly Fed Business Survey quantitatively was less good in April 2011 – but this is a quantification of opinion, and changes may be real, or not.