Econoday Survey Comments
The strength of the Philadelphia Fed’s general business conditions index is impossible to exaggerate. February’s 43.3 is not a misprint. It’s the strongest since very far back, since January 1984. Yes, this index is a response to a single question on monthly sentiment but its enormous strength is confirmed by a very tangible reading, and that is the new orders index which jumped 12 points in the month to 38 which itself is a record or should be one if it is not.
Other readings in this report are less spectacular but very strong including a big build for backlogs, a healthy draw for inventories, understandable slowing in delivery times, and noticeable pressures in costs and positive traction for selling prices.
As an advance indicator, this report rivals the ISM manufacturing survey in importance. These readings point squarely at 2017 acceleration for a factory sector that limped through 2016.
General Activity Business Index
The six-month look-ahead forecast is all but useless, so let’s isolate the current picture.
Is this another flash in the pan jump or the real deal? I don’t have an answer but it is not consistent with a slowdown and layoffs in the Auto sector.
Prices Paid vs. Prices Received
- 33 percent of the firms reported increases in the prices paid for inputs; only 3 percent reported paying lower prices.
- The prices paid index edged 3 points lower to 29.9.
- 22 percent of the firms reported receiving higher prices, down from 31 percent in January.
- The prices received index decreased 16 points but remains positive at 10.6.
By a ratio of 29.9 to 10.6 more firms report higher input prices than prices they get for manufactured goods. That’s not a sign of strength.
Here’s a final thought to ponder:
Mike “Mish” Shedlock