"Economists are pessimists: they've predicted 8 of the last 3 depressions."
--Barry Asmus

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Thursday, February 17, 2011

Philadelphia Fed Survey

"As goes Philadelphia, so goes the nation."
Yeah, that's a misquote, but the quote has been misquoted so frequently that I don't actually know what the original quote was. Maybe it was Sumerian: "As goes Ur, so goes the Fertile Crescent," or something of that nature.
But I digress. The statement "as goes Philadelphia, so goes the nation" is the theory behind why the Philadelphia fed survey is such an important economic measure. It is, technically, just a survey of manufacturing conditions within the Philadelphia Federal Reserve district, but it is also considered an indicator of manufacturing conditions across the nation.
Now, last month we had a General Business Conditions Index level of 19.3, which missed expectations but still ranked as a fourth consecutive month of positive readings, meaning improvements in new orders, demand for manufactured goods, and shipments. And the Street loves improvements in those categories, because they have positive indications for GDP.
This month, the Econoday-surveyed analysts are feeling optimistic. They're looking for the index to rise to 22.0. Are they right? Let's have a look.
Well, yes and no. Looking at the report, they were certainly right to be optimistic. They just weren't optimistic enough. The General Business Conditions Index increased to a level of 35.9, beating expectatons by an overwhelming amount and coming in at the highest level since January of 2004. here's some other highlights:
  • The new orders index is virtually unchanged, but the shipments index increased 22 points.
  • The employment index increased 6 points. Better yet, this is the 6th consecutive month that more firms reported an increase in employment than a decrease in employment.
  • The majority of surveyed firms remain optimistic about future growth and activity.
So, yeah. That's good news.

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