The Philly Fed Business Outlook Survey returned to expansion. Key elements improved. Both manufacturing surveys released so far for this month are in expansion.

This is a very noisy index which readers should be reminded is sentiment based. The Philly Fed historically is one of the more negative of all the Fed manufacturing surveys but has been more positive then the others recently.

The index improved from -2.8 to +12.4. Positive numbers indicate market expansion, negative numbers indicate contraction. The market expected (from Bloomberg) -4.0 to 0.9 (consensus -1.4).

Firms responding to the Manufacturing Business Outlook Survey reported an improvement in business conditions this month. The indicator for general activity rose sharply in March to its first positive reading in seven months. Other broad indicators offered similar signals of growth: The indexes for shipments and new orders also rose notably. Firms continued to report overall weak employment. With respect to the manufacturers’ forecasts, the survey’s future indicators also showed significant improvement this month.

Current Indicators Reflect a Pickup in Activity

The diffusion index for current activity increased from a reading of -2.8 in February to 12.4 this month, its first positive reading in seven months (see Chart 1). Both the current new orders and shipments indexes also showed improvement this month. The current new orders index returned to positive territory, increasing 21 points to 15.7. Nearly 37 percent of the firms reported an increase in new orders this month. The current shipments index rose 20 points, to 22.1. The unfilled orders and delivery time indexes showed notable improvement, increasing 11 points and 16 points, respectively. While the unfilled orders remained slightly negative, the delivery time index reached its first positive reading in 11 months. Firms continued to report overall declines in inventories.

The survey’s indicators of employment improved but suggest continued weakness. The employment index increased 4 points but remained slightly negative at -1.1. About 67 percent of the firms reported no change in employment this month, and the percentage reporting decreases (17 percent) was slightly larger than the percentage reporting increases (16 percent). Firms reported a slight rise in average work hours: The workweek index increased 19 points and was at its first positive reading in three months.