Note from Doug: Having lived for two years in Paoli, PA, a suburb west of Philadelphia just south of Valley Forge, I have a special interest in this regional indicator. But, more importantly, it gives a generally reliable clue as to direction of the broader Chicago Fed's National Activity Index.

The Philly Fed's Business Outlook Survey is a monthly report for the Third Federal Reserve District, covers eastern Pennsylvania, southern New Jersey, and Delaware. Here is the introduction from the Business Outlook Survey released today:

Firms responding to the May Business Outlook Survey indicated that manufacturing growth fell back from the pace of recent months. The survey's broad indicators for general activity fell into negative territory for the first time in eight months. Indicators for new orders and employment also suggested slight declines from April. Input price pressures were less in evidence this month, and for the first time in nine months, more firms reported price declines for their products than reported increases. The survey's indicators of future activity remained positive but weakened considerably from April. (Full PDF Report)

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The first chart below is based on the complete historical series for general activity dating from May 1968 with recessions highlighted.

 

 

In the next chart, the red dots show the indicator itself, which is quite noisy, and the 3-month moving average which is more useful as a indicator of coincident economic activity. The average absolute monthly change across this data series is 8.0, which suggests that the 14.3 point change from last month has definite statistical significance.

 

 

The next chart is an overlay starting in 2000 of the General Activity Index and the Future General Activity Index — the outlook six months ahead. The latest reading is a major decline (18.8 points) from the relatively stable future outlook of the previous three months.

 

 

The Philly Fed General Activity Index continues to be a key indicator to watch closely.