Philadelphia Fed Survey – The Philadelphia Business outlook survey

Chris Lee

The Philadelphia Business outlook survey is conducted by the Federal Bank of Philadelphia on the 3rd Thursday of each month at around 12 pm EST. It is conducted in a way similar to the ISM’s PMIs. Major industries in the region are given questionnaires, and their answers are then gathered to create a diffusion index. The difference between the Philadelphia Fed’s survey and the ISM’s reports is that instead of the 50 threshold separating expansion and contraction, this report uses zero as the separation line.

The report has been available since 1968, and it is regarded as a good indicator of business trends in the region, and a good early hint on the following national PMI releases.

The Philadelphia Fed Business Survey has a good correlation with the PMI reports following it and is therefore watched closely by the market. Market reaction is not very significant in general, but a surprise can lead analysts to significantly reconsider their expectations for the ensuing major reports, which in itself can lead to some readjustment and volatility in the markets.

The questionnaires provided to business managers in the region contain the same questions which are included in the PMI reports: employment, working hours, new and unfilled orders, shipments, inventories, delivery times, as well as prices paid and received. Often the commentary provided by the bank is more important than the absolute numerical values in the report. Anecdotal reports, as well as the bank’s own analysis make the survey a powerful component of the analytical picture constructed by traders and analysts. In addition, special questions, included in relation to the most pressing issues in the regional and national economies, supply a strong additional dimension to the contents of the report.

The language of the report is directed to the layman, and its structure is also clean and simple. Although the report is relatively short, it is created in a way to maximize the information/time ratio. The Philadelphia region has a diverse economy, with many manufacturing sectors from mining to semiconductors represented in the survey, which makes it a good sample of the overall American economy, increasing its predictive value. Finally, it is the first of the numerous regional PMIs published, and this gives it a powerful early role in the formation of investor and trader perceptions.

The general weaknesses of PMI reports are also valid in the evaluation of the Philadelphia Fed Survey. The answers provided as “better, worse, same” are far from being objective or detailed, and are unable to capture the quantitative performance of the respondent’s businesses. A tiny improvement, and a great jump in activity are both communicated by the survey with the same “better”. The report also covers a small geographical region of the U.S., and is inadequate for analyzing the state of the nation satisfyingly. Finally, it is extremely volatile, and this quality makes it very difficult to evaluate it in a meaningful way from time to time.


The Philadelphia Fed Survey needs to be considered in conjunction with other regional surveys to give a meaningful picture of activity in the U.S. as a whole. Even then, the different samples, and scope of the surveys make it a difficult task to evaluate the report properly. In that sense, perhaps the most important information contained in the survey is the bank’s commentary, and the various pieces of anecdotal reports reflecting the actual conditions as perceived by business leaders.

Chris Lee

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