What Is the Philadelphia Fed Survey?

The Philadelphia Fed Survey, officially known as the Philadelphia Federal Reserve Bank’s Manufacturing Business Outlook Survey, is a survey that tracks regional manufacturing conditions in the Northeastern United States. The intention of the survey is to provide a snapshot of current manufacturing activity in this region, as well as provide a short-term forecast of manufacturing conditions in the area, which may provide an indication of conditions throughout the United States. It is also known as the Philadelphia Fed Index.

Key Takeaways

  • The Philadelphia Fed Survey is officially known as the Philadelphia Federal Reserve Bank’s Manufacturing Business Outlook Survey. It is also known as the Philadelphia Fed Index.
  • The purpose of the survey is to track the regional manufacturing conditions in the Northeastern United States.
  • The Philadelphia Fed Survey provides a snapshot of the current manufacturing activity in this region as well as providing short-term forecasts, which aim to provide an indication of the manufacturing conditions in the U.S.
  • The survey is conducted each month by sending a voluntary questionnaire to manufacturers in the region.
  • Questions in the survey ask manufacturers to report on the overall change to their businesses in the last month, covering topics such as employment, working hours, new and unfilled orders, shipments, inventories, delivery times, and prices.
  • The report is presented monthly with a qualitative assessment of the sector, citing the changes in the indicators. It also contains graphs comparing the current and future activity, as well as providing the table that lists the indicators and what percentage of respondents reported "increase," "no change," or "decrease" for a specific indicator.

Understanding the Philadelphia Fed Survey

The Philadelphia Fed Survey tracks the manufacturing conditions in the Third Federal Reserve District of the United States, which encompasses Eastern Pennsylvania, Southern New Jersey, and Delaware. The Survey is conducted by the Federal Reserve Bank of Philadelphia.

Each month, the Bank sends a voluntary questionnaire to manufacturers in its region. Participants are asked to indicate the direction of change over the last month in their overall business activity by reporting on various measures. These measures include employment, working hours, new and unfilled orders, shipments, inventories, delivery times, and prices.

Participants are also asked how they expect their business to change over the next six months. Some months may have additional special questions, focused on a topic relevant to the current market environment. The results of this survey are compiled by the Federal Reserve Bank of Philadelphia into its Manufacturing Business Outlook Survey, and this document is what is commonly referred to as the Philadelphia Fed Survey.

Content of the Philadelphia Fed Survey

The Philadelphia Fed Survey provides a wealth of written and graphical information on the manufacturing environment in the Northeastern region of the United States. Although the Survey only queries manufacturers in a small subset of the United States, it may be a useful indicator of economic and business activity across the nation.

Because manufacturing is central to overall economic activity, the health of the sector is an indicator of the health of the overall economy, and the Philadelphia Fed Survey could provide early indications of the problems in the regional sector and consequently in the entire U.S. economy.

Though there is contrary evidence of the strength of the Survey’s predictive power, the publication of the survey can affect capital markets, as it is commonly quoted by news magazines and referred to by investment professionals and economists. Part of the value of the survey is the longevity of the available data, as the Survey has been conducted continuously since May 1968, and monthly historical data is readily available.

The Philadelphia Fed Survey is presented like a newsletter that begins with an overview of the manufacturing sector of the region, indicating whether the sector is growing or shrinking, what are the driving indicators, and similarly the lacking ones. The report discusses the special questions as well.

The survey also includes a chart that compares future activity and current activity. Every report also includes a table of the survey that contains each indicator, for example, new orders and shipments, and indicates what percentage of respondents reported either "increase," "no change," or "decrease." The table then provides a diffusion index for each indicator.