Philadelphia Fed Index

What Does Philadelphia Federal Index Mean?

This index is published by the Philadelphia Federal Reserve Bank on the third Thursday of the month at 10 am EST. It is considered to be a good gauge of general business conditions.

It is an index measuring changes in business growth. The index is constructed from a survey of participants who voluntarily answer questions regarding the direction of change in their overall business activities. The survey is a measure of regional manufacturing growth. When the index is above 0 it indicates factory-sector growth, and when below 0 indicates contraction. The survey covers the Pennsylvania, New Jersey and Delaware region.

There are many regional manufacturing surveys or indices, and they tend to be ranked in order of timeliness and the importance of the region. The two most important are the Chicago PMI and the Philadelphia Fed Index, in that order. While the Chicago PMI has an impressive 91% positive correlation with the national ISM Index, the Philadelphia Fed Index has a decent 78% positive correlation with the national ISM Index. Several smaller surveys are then released before the Chicago purchasing managers’ report on the last day of each month. The purchasing managers’ reports are measured like the national ISM Index – 50% marks the breakeven line between an expanding and contracting manufacturing sector. However, for the Philadelphia Fed index, 0 is the breakeven mark.

These surveys can be of some help in forecasting the national ISM Index – particularly the Philadelphia and Chicago surveys which are more closely watched due to their timeliness and the fact that these regions represent a reasonable cross section of national manufacturing activities.

POTENTIAL IMPACT ON INTEREST RATES: HIGH