Philadelphia Fed Business Outlook Survey for August 2010

The Philadelphia Federal Reserve Business Outlook Survey is a regional snapshot of manufacturing and it's a bloodbath this month. The overall index dropped to -7.7, the first time since July 2009. An astounding 9.7% of manufacturers offshore outsourced even more manufacturing and production this year alone. Almost none are bringing those jobs back.


Philly Fed General


The monthly indexes are alarming.

  • General Business Conditions: -7.7
  • New Orders: -7.1
  • Shipments: -4.5
  • Unfilled Orders: -7.1
  • Delivery Times: -11.0
  • Inventories: -11.6
  • Prices Paid: 11.8
  • Prices Received: -12.5
  • Number of Employees: -2.7
  • Average Work Week: -17.1

While future growth is still positive:

Results from the Business Outlook Survey suggest that regional manufacturing activity weakened in August, after two months of slowing activity. Indexes for general activity, new orders, and shipments all registered negative readings this month. Firms also reported declines in employment and work hours. The survey’s broad indicators of future activity continue to suggest that the region’s manufacturing executives expect growth in business over the next six months, but optimism has waned notably in recent months.

These numbers are so alarming, one needs to look at them in context. Below are graphs on the monthly diffusion indexes for the Philadelphia regional manufacturing economy. Bear in mind Pennsylvania was hit very hard by offshore outsourcing to China at the start of 2000. Last thing this state needs is another world of hurt for it's manufacturing sector. Look at prices receiieved versus prices paid. Workin' harder and receiving less, not good.


Philly Fed New Orders


Philly Fed New Employees


philly fed index Inventories


Philly Fed Index Prices Received


Philly Fed Index shipments

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offshore outsourcing, special questions

While the Philadelphia Fed did something great, they finally asked how much production is being offshore outsourced, we should make it mandatory that the NY Fed, via the empire state survey, most importantly the production & capacity report from the Fed should require offshore outsourced, global activities from U.S. businesses be reported, monitored and included in these reports.

I'm not alone in picking up on the Philly Fed's special questions on offshore outsourcing.

The AAM did and wrote a call out on the latest hype of rural sourcing or that somehow these jobs are coming back.

They will not come back unless the U.S. government forces them back, along with a host of carrots and sticks, such as tax penalties and incentives, as well as trade policy modifications, even a payroll holiday, to force businesses to produce, manufacture here in the U.S.

Good for the Philly Fed for asking the obvious.