What is the Philadelphia Fed Survey?
The Federal Reserve Bank of Philadelphia Survey, officially known as the Federal Reserve Bank of Philadelphia Survey of Manufacturing Business Outlook, is a survey that tracks regional manufacturing conditions in the northeastern United States. The intent of the survey is to provide a snapshot of current manufacturing activity in this region, as well as a short-term forecast of manufacturing conditions in the region, which may provide an indication of conditions across the United States. It is also known as the Philadelphia Fed Index.
Basic Takeaways
- The Federal Reserve Bank of Philadelphia Survey is officially known as the Federal Reserve Bank of Philadelphia Survey of Manufacturing Business Prospects. It is also known as the Philadelphia Fed Index.
- The purpose of the survey is to monitor regional production conditions in the northeastern United States.
- The Philadelphia Fed Survey provides a snapshot of current manufacturing activity in this region, as well as providing near-term forecasts, which aim to provide an indication of manufacturing conditions in the US.
- The survey is carried out every month by sending a voluntary questionnaire to manufacturers in the area.
- Questions in the survey ask manufacturers to report the overall change in their businesses over the past month, covering topics such as employment, hours worked, new and unfilled orders, shipments, inventories, delivery times and prices.
- The report is presented monthly with a qualitative assessment of the industry, listing changes in indicators. It also contains graphs comparing current and future activity, as well as a table listing indicators and the percentage of respondents reporting “increase”, “no change” or “decrease” for a particular indicator.
Understanding the Philadelphia Fed Survey
The Philadelphia Fed Survey tracks manufacturing conditions in the United States' Third Federal Reserve District, which includes eastern Pennsylvania, southern New Jersey and Delaware. The survey is conducted by the Federal Reserve Bank of Philadelphia.
Every month, the Bank sends a voluntary questionnaire to the manufacturers in its area. Participants are asked to indicate the direction of change over the past month in their overall business activity by citing various measures. These measures include employment, hours worked, new and unfilled orders, shipments, inventory, lead 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 in the Manufacturing Business Outlook Survey, and this document is what is commonly referred to as the Philadelphia Fed Survey.
Contents of the Philadelphia Fed Survey
The Philadelphia Fed Survey provides a wealth of written and graphical information about the manufacturing environment in the Northeast region of the United States. Although the Survey only surveys manufacturers in a small subset of the United States, it can be a useful indicator of economic and business activity across the country.
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 problems in the regional sector and thus the entire economy of USA.
Although there is conflicting evidence about the Survey's strong predictive power, the publication of the survey can influence capital markets, as it is commonly reported by news magazines and reported by investment professionals and economists. Part of the value of the survey is the longevity of the data available, as the Survey has been conducted continuously since May 1968 and monthly historical data is readily available.
The Philadelphia Fed Survey is presented as a fact sheet that begins with an overview of the region's manufacturing sector, indicating whether the industry is growing or shrinking, what the drivers are, and similarly, those that are missing. The report also examines the specific questions.
The research also includes a chart comparing future activity and current activity. Each report also includes a table of the survey containing each indicator, for example, new orders and shipments, and indicating what percentage of respondents reported either “increase”, “no change” or “decrease”. The table then provides a diffusion index for each indicator.